Colombians Hope DCM Pace Continues

Colombian domestic bond issuance is off to a better start this year than last, though few expect a return to the higher volumes seen in 2009. A COP500bn ($282m) sale from Cementos Argos scheduled for next week would be a boost to a market that has seen mostly financial institution issuance. Colombian domestic issuers have raised $1.73bn-equivalent so far this year, through 9 transactions, according to Dealogic and LatinFinance data. There was no issuance in the corresponding period in 2011, with markets not opening until May, to raise $3.24bn-equivalent for the full year. This was up from $2.31bn-equivalent for all of 2010. Francisco Chaves, fixed income strategist at Colombia’s Corredores Asociados, tells LatinFinanace that sentiments have changed since last year, along with the costs of issuing. Policymakers’ reduction of the interest rates from 10% to 3% plus low inflation levels had made issuing conditions attractive, though this changed when rates went up last year. “It was because of the less interest from the investors to buy bonds at high interest rates,” Chaves says. Additionally, corporates forced into the domestic markets during the credit crisis are not yet in need to issue again. “Probably in 4 to 5 years we’re going to see again these same corporates trying to roll over their debt. There’s not too many more corporates in the pipeline needing the same kind of money,” he says. Promigas and ISA are examples of companies that could tap the market as their bonds mature. Argos could open the market up for more corporate issuance, but not to the same levels as 2009, he says. A local DCM banker notes that the largest companies have already fulfilled their financing needs. “We don’t expect those types of companies to issue this year,” the banker says, noting that it’s likely that the main issuers will still be banks and financial institutions. Argos, rated AA+ on a national scale, plans to sell bonds at maturities of 8-15 years May 16. Continuing the financial