As trouble continues to brew in Europe, investors are still broadly positive on Latin America’s ability to resist the impact of events like fallout from a Greek bailout. “There will be additional validity coming out of [the Greece situation]. But at the end of the day, I think the Latin countries are in very good shape fiscally and monetarily,” says James Barrineau, global economic research analyst at Alliance Bernstein. “EM sovereigns are in a better position than their developed counterparts from a fiscal and leverage perspective, as well as from a growth perspective, and that is reflected in the spreads,” says Shamaila Khan, managing director at TIAA-CREF. However, she notes that the asset class is not immune to global risk aversion, and there could be knock-on effects from stalled recovery in the developed world. In the longer term, a fall in commodity prices poses the greatest threat, particularly to the region’s corporates. As for political risk, Barrineau finds warnings of volatility relating to Brazil’s elections “probably overstated” by the sell-side, and says either of the 2 main candidates can be broadly expected to continue the current economic policies. In Colombia, Khan adds that a decision barring Alvaro Uribe from seeking a third term “bodes well for institutional stability.” Both spoke at a Fitch Ratings panel Tuesday in New York.
Category: Regions
America Movil Breaks Mexico Ice
America Movil has priced the first large non-government corporate bond in Mexico’s domestic market this year, raising almost MXP15bn at better rates than Pemex. A MXP4.60bn 5-year tranche pays TIIE plus 40bp, a MXP7.00bn 10-year pays 8.60%, and a MXP3.28bn 15-year UDI-denominated piece pays a fixed 6.20%. Demand topped MXP18bn, according to bankers managing the sale. It came from a variety of investors including private banking, insurance companies, mutual and pension funds. The 2015 floater priced at the low end of initial investor expectations, which ran from about 40bp to 75bp, while the 2010’s spread of Mbono plus 95bp was in line with 75bp-100bp expectations. The UDI-denominated tranche was larger than the up to MXP2bn expected, as the issuer opted to increase it at the expense of the TIIE tranche, says a banker on the deal. America Movil had planned to issue up to MXP15bn, including up to MXP6bn in a 5-year floater, up to MXP7bn in a 10-year fixed rate note. The UDI deal was expected to be privately placed with a handful of investors. Banamex, Inbursa and Santander managed the sale, rated AAA on a national scale. The 3-part sale will be followed by a dollar issue this year, after roadshows in Q2. The issue is the first from America Movil since it announced it will take control of Carso and Telmex via M&A expected to forge the world’s third biggest telecom. In the only other large issuance in what has been a slow-starting year, Pemex sold MXP8bn in 5-year floating-rate notes at TIIE plus 70bp, MXP5bn in 10-year at 9.10%, and a 10-year MXP2bn UDI piece at 4.20%. Though Pemex spreads have improved since the sale, bankers on and away from the deal say the new America Movil bonds generally have priced through the Pemex curve. America Movil has indicated it may follow the peso bonds with issuance in dollars and other currencies later this year. The next large transaction in the Mexican bond market should be an up to MXP5bn deal from state utility CFE.
Colombia Capital Markets: Off Peak, But On Track
This year may not see the record-breaking flow of local bonds Colombia enjoyed in 2009. But brisk activity is expected as liquidity persists and investors continue to seek assets.
Finance Minister Rankings: Trial by Fire
Chile beats Mexico when LatAm finance ministers are ranked for their handling of last year’s crisis. Unwinding stimulus measures and containing inflation are the main challenges.
Mexican Issuance: Staging a Comeback
Mexico’s overseas debt market has roared back to life, while corporate peso debt is still waiting for quasi sovereigns to bring it back from the brink. Beware rising interest rates.
Samurai Bond Market: LatAm Issuers Return
Sovereigns have returned to Japan for diversification at an attractive rate. Corporates are another matter and the scope of the Samurai market remains to be seen.
Peru Railroad Investment: Funds Spring Up
New infrastructure funds are springing up to finance billions of dollars in Peruvian railroads. The government hopes to also see investment from commodity producers.
Colombia Infrastructure: Funds Accumulate
Colombia’s multiple infrastructure dreams look closer to becoming a reality as all the talk of the last few years moves closer to action.
Scotia Buying RBS Colombia Assets
Scotiabank says it is acquiring RBS’ Colombian assets. While neither of the companies is disclosing a sale price, Colombia-based analysts who cover the local banking industry believe the deal could be valued at $50m-$100m. This deal represents Scotia’s first foray into the Colombian market. RBS’s presence in Colombia was not significant. Data from the local financial regulator show that it has less than a 0.25% market share by assets. RBS Colombia’s assets were around $247.80m at the end of 2009. RBS said in February 18 that it was in talks to sell this unit.
CFE Plots Additional Local Bonds
As Mexico’s CFE prepares for a domestic bond issue of up to MXP5bn, the state-owned utility has also announced plans to issue MXP500m under a special bond program for infrastructure spending. The 3.5-year notes will pay a floating interest rate, according to a banker on the deal, and should be priced this month. Ixe is managing the sale. Proceeds from the AAA transaction will used to pre-fund certain expenses for certain kinds of infrastructure projects known as productive infrastructure with deferred expenditure impact, through a fideicomiso jointly set up with Bancomext. Last year, CFE placed MXP1.1bn of the bonds at TIIE plus 75bp, under the MXP3bn program. CFE is also plotting a 10-year fixed- and floating-rate issue of up to MXP5bn through Banamex and Santander, expected this month or next.