Greek Angst Scuppers LatAm DCM

Volatility from European sovereign debt worries, coupled with tightening spreads, could push the lull in LatAm bond issuance well past next week’s Carnival break, bankers and investors say. Despite being liquid, investors are inclined to wait until after a re-pricing expected when the Greek debt crisis resolves. “After last year’s rally in risk assets, markets are taking a breather, and I think investors are now going to be more selective,” Chris Kelly, senior portfolio manager at Fortis Investments, tells LatinFinance. “For each deal, it’s going to depend on the technicals and how well they price,” adds the manager of more than $3bn in EM debt. Investors are confident that there are still plenty of viable issuers in the region. “Most of the countries and a lot of the corporates in Latin America are very well-positioned to deal with whatever the world throws at them because of Greece,” Luz Padilla, head of EM debt at DoubleLine Capital, tells LatinFinance “From an investor point of view, if I can buy something at wider levels in a month or two after the Greek situation plays itself out, I can be a bit more patient,” adds the manager at the startup, which is not disclosing AUM. Volatility surrounding Athens’ woes has not reached its peak, says Padilla. This is keeping investors, and therefore issuers, on the sidelines. Deals from BES Investimentos Brasil and Vanguarda do Brasil were recently pulled, while several others are stuck in the pipeline. JPMorgan meanwhile downgraded its EMBIG index to marketweight from overweight, on fears that Greece will further dent risk appetite. “It’s not complicated – risk appetite will be back when volatility subsides,” says a New York-based DCM banker. He adds that he is unsure when clients in his pipeline will be able to come at acceptable levels. The list of LatAm DCM hopefuls includes Bradesco, Itau, and BBVA Bancomer, Marfrig and the City of Buenos Aires.