Mind the Gap: DCM Hopes for Revival

As borrowers and investors return from the annual seasonal hiatus – this year prolonged my miserable global conditions – cross-border DCM bankers are hopeful of the traditional September bounce in volumes. There is pent up demand and issuers may finally believe the sell side when they are told that the cheap money’s gone away and they need to issue now. But there is still a looming price gulf between issuers and investors. “The big question is ‘has the credit crunch peaked?’,” says Eric Ollom, head of LatAm corporate debt research at ING. That is a tough call, but a lot of the trouble has already been factored in. Defaults have not yet peaked, often a sign of a cycle hitting bottom, but Ollom notes that there should not be too many in LatAm. Investment-grade names can issue whenever they like, but prudent debt management means they can hold off. Bankers are busy trying to convince them otherwise. “We’re advising issuers not to wait – this could be the last opportunity this year,” notes one New-York based banker, repeating a warning that has been issued every summer for at least the last five years. As usual, it will take a respected name to bridge the gap. America Movil and Telmex have maturities approaching, and last week Petrobras’ Jose Sergio Gabrielli reiterated his company’s preference for debt to fund exploration of new oil finds. The region’s top sovereigns may not be in a hurry, but don’t rule out opportunistic taps from Brazil or Colombia.