EM bond funds took in $1.3bn for the week ending August 3, according to EPFR Global, as investors viewed the asset class as a safe haven amid broader market turmoil. According to Lipper, EM debt funds rose by 0.22% for the week ending August 4, and are up 6.70% ytd. Meanwhile, global income funds climbed 0.18% for the week, to reach 5.13% growth ytd. However, international income funds fell 0.54%, bringing the ytd return to 5.65%.
Category: Bonds
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Tecnisa to Try Local Funding
Real estate developer Tecnisa plans to sell up to BRL300m ($190m) in bonds in Brazil’s domestic market, choosing from among three possible tranches during the bookbuilding process. A 2015 tranche would pay the DI plus up to 1.85%, a 2016 tranche would pay DI plus up to 2.0%, and a 2017 inflation-linked portion would pay a fixed rate. Tecnisa is raising funds to improve its debt profile and provide working capital. An IR official says the company will not unveil the lead(s) on the deal until later this week. The paper is being sold under a 476 restricted format. Tecnisa is rated A minus on a national scale.
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CFG to Meet Fixed Income Accounts
Caribbean Financial Group (CFG), a holdco for consumer finance companies in Panama and the Caribbean, is meeting with fixed-income investors starting today via JP Morgan with the intention of selling a144A/RegS offering market conditions permitting. CFG is commencing meetings in Los Angeles before heading to London next Monday, Boston on Tuesday, and wrapping up Wednesday in New York. CFG offers consumer loans to the low-income segment of its Island Finance subsidiaries in Aruba, Bonaire, Curacao, St. Maarten, and Trinidad & Tobago. CFG also owns Financiera el Sol which operates in Panama. CFG finances operations with a single commercial credit line and is looking at the debt capital markets to substitute bank financing with long-term debt bond issuance, S&P says. CFG is rated B minus by S&P and Fitch.
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M&G Heard Extending Investor Talks
M&G Finance is heard extending fixed income investor meetings into next week as it looks to issue a 144A/RegS for life in $500m 7NC4 senior unsecured notes, with rumors of a 10-handle pricing. The US subsidiary of Italian chemical company Mossi & Ghisolfi International, with extensive operations in Mexico and Brazil, initially launched its roadshow July 25-29 in the US before wrapping up in London on Monday. Investors say they like the business, but express concern over a decision taken by the PET resin producer, under its hybrid bond agreement, to suspend coupon payments during the 2009 financial crisis. The company has since seen improvements in 2010 and 2011 supported by a favorable operating environment and declining competition seen by chemical commodity manufacturers. In 2007, M&G issued EUR200m 7.5% hybrid bonds and later bought back EUR128m of the bonds at 45% discount. The remaining EUR72m of the hybrid bond is held by third parties. “The company has a decent business but had a bad run when it penalized investors,” notes one banker. Fitch expects M&G’s net leverage ratio to increase to a peak of 4.4x in 2013 from 3.1x in December 2010 due to investments in new PET and PTA plants totaling around $700m. Use of proceeds is intended for capex, debt repayment, liquidity and working capital. Some investors looking at the credit are seeking a concession due to it being a first time issuer, its lower rating, small size, lack of strategic partnerships, and rising leverage. The bonds are rated B3/BB by Moody’s and Fitch. JPMorgan is the sole lead.
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Volatility Raises Questions about Bond Supply
Some bankers have been predicting anywhere between $5bn-$7bn in new bond supply for September and perhaps some more this month as companies look to tap before the post-summer rush, but this week’s rout and the gloomy mood hanging over the market raises doubts about just how many deals will see the light of day, at least in the short-term. This comes after US equity markets fell a good 4% Thursday, while the Bovespa plummeted 5.7% as risk aversion spiked over fears of an economic slowdown. “If risks escalate and there is a massive selloff in the markets, the September pipeline could move to December,” says one investor. Names like development bank BNDES, Colombian utility Empresa de Energia de Bogota (EEB), Brazilian electricity company Eletrobras, Brazilian toll-road company CCR, steelmaker Usiminas as well as banks like Banco do Brasil and Bradesco have all been heard eyeing either the dollar or global BRL market. To be sure, in theory pricing has become even more attractive after the yield on the 10-year UST hit 2.46% Thursday, breaching the 2.49% low reached in November 2010, but volatility is likely to make execution difficult. “If USTs continue at low levels and market conditions permit, there is potential for very high volumes in the $5bn-$7bn range or more,” notes a DCM banker. “Activity in the secondary over the last few sessions has seen demand for the belly of the curve but there has been more interest for 30-year bonds.” However, Wednesday saw secondaries slump alongside the rest of the broader market. “This is probably the worse day in EM debt this year, though we have yet to get to levels seen during the May sell-off last year,” said one EM corporate investor Thursday. “People are waiting for the payroll number (Friday) to see if we get some relief from that.” Still investors have money to put to work and bankers have been expecting companies to start announcing deals in late August. Meanwhile, the buyside is putting greater emphasis on liquidity. “In t
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Paraguay Gets $75m from CAF
Regional development bank CAF has provided Paraguay with a $75m loan to support a government program to develop a more efficient and reliable national electricity system. The loan will also comprise an additional $20m in co-financing from the OPEC Fund for International Development (OFID). The estimated cost of the development program is $111m, of which 68% will be financed by CAF, 18% by the OFID and the remaining 14% financed by resources from the National Electricity Administration.
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Safra Whispers Low Double Digits
Banco Safra is heard whispering 10.5% area on its 5-year senior unsecured Global BRL bond, with pricing expected as soon as today. Investors are comping against Banque Safra Luxembourg’s BRL400m Reg S only 10% 2015 (BBB minus), which was priced at 99.627% to yield 10.125% in June and was trading Tuesday afternoon at around 9.9%. “A 10.25% handle would be fine [to participate],” notes one senior portfolio manager following the name. Another, albeit less than perfect, comp is Banco Votorantim’s inflation-linked BRL1bn 6.25% 2016s (Baa2/BBB minus), which have been trading around 10% including IPCA. Investors are comfortable taking exposure to Banco Safra risk in light of the Baa2 and BBB minus ratings from Moody’s and Fitch, but increasing concerns over rapid credit growth in Brazil may mean that accounts will demand higher yields. Investors say Safra is looking at a BRL 300-BRL400m size for the 144A/Reg S deal. JPMorgan and UBS are the leads.
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Allocations Limit Supply of Venezuela’s New 2031
Venezuela’s new $4.2bn 11.95% 2031 may be large, but the immediate impact of so much supply may be limited thanks to how the bonds were allocated. The sovereign followed its standard formula of pricing beforehand and sold he paper among a captive group of local buyers, but according to Barclays, about $2bn-$2.5bn of the offering may have been placed in the public banking sector, which is likely sell the bonds through the government’s FX platform Sitme. The private sector, which typically sells such issues immediately into the secondary, saw smaller tickets and allocations. This may be negative news for the Venezuelan private sector, but should be supportive for Venezuelan assets overall, the shop notes. “[The fact that] the new 31s will not be sold aggressively by local holders leaves the market vulnerable to further upside price action,” said an investor. The deal was lead by Deutsche Bank and the Russian entity Evrofinance Mosnarbank, which is partly owned by Venezuelan development fund Fonden. “The idea is to try to bring Russian investors to buy in the secondary,” says a banker. The bond was priced at par and essentially amortizes equally in August 2029, 2030 and 2031. The RegS bond matures on August 5 2031.
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CAF Preps Local MXN Bonds
Regional development bank Corporacion Andina de Fomento (CAF) plans to issue up to MXP 1.5bn ($128m) in 3-year and 10-year bonds through lead BBVA Bancomer. The 3-year floater is expected to price at a spread over TIIE with the 10-year at a fixed rate. CAF has a global A1/A +/ A+ rating from Moody’s, S&P and Fitch respectively. The MXP bonds have yet to receive a local rating. CAF last came to market in June when it retapped its 3.75% 2016s for another $500m. The MXP bonds have an August 19 issue date.
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CCR Heard Sounding Investors
Brazilian toll-road operator road operator Companhia de Concessoes Rodoviarias (CCR) has been sounding out the US buyside through Bank of America Merrill Lynch (BAML), say investors. For now, the Brazilian toll-road operator is simply heard to be engaging accounts but with no solid deal talk. However, if it were to issue USD bonds, such a deal would mark the borrower’s debut in the international bonds markets, though it is no stranger to local debenture transactions. In May, its subsidiary Concessionaria do Rodoanel Oeste sold BRL500m in 2014 bonds paying 109.2% of the DI, and BRL550m in 2015 bonds paying 111.0% of the DI. Bradesco and HSBC managed the sale, rated Aa2 on a national scale. In 2009, CCR also priced a follow-on equity offering through Itau BBA, with BTG Pactual and BAML coming in as joint leads.