DCM Flow Runs Well Into Summer

LatAm issuers of all stripes are lining up to tap a DCM window that looks set to remain open well into the summer. Brisk flow so far this year will likely continue, driven by a fall in risk aversion, ample liquidity and the fact that issuers want to pull the trigger before the August lull to avoid potential volatility later in the year. “You have had a bit of a risk-on session for a little while, which has helped issuance,” Edwin Gutierrez, who helps manage $5bn in EM debt at Aberdeen Asset Management, tells LatinFinance. He notes a bounce in equity markets and an easing of Eurozone concerns. “There are still a number of worries, but we’ve hit an inflection point in market sentiment, broadly,” says a DCM banker. “Investors are there, but they are extracting extra yield given that the market is still not as it was before [the Eurozone debt crisis],” Natalia Corfield, EM credit analyst at ING, tells LatinFinance. Sub-investment grade is paying a premium, Corfield says. Even some high-grade like Pemex and CSN is paying more than they might have earlier in the year, she adds. The market appears to be open even for single B credits, as long as they are willing to pay up. “If you come at the appropriate level, there will be money and liquidity for this asset class,” says another DCM banker, pointing to the pent-up demand demonstrated by a $5bn plus book for Pemex’s $2bn deal and a nearly $3bn book for the $1bn CSN bond. Meatpacker JBS is expected to issue this week following a roadshow, as is Banco BMG with a 2020 Tier 2. Other corporates heard considering issuing in the next few months include Mexico’s Mexicana, Argentina’s YPF Repsol, Chile’s Enap, as well as Brazil’s Sabesp and Electrobras. Barbados will roadshow this week and Argentina’s Chubut province should wrap up a deal. Possible issuance is also heard from Peru, Chile, province of Cordoba, and Trinidad & Tobago. LatAm has issued $47bn in bonds year-to-date, according to Dealogic, versus $18bn in H1 2009.