Brazilian issuers are coming back to the domestic fixed-income market as spreads compress and the dust settles on the accounting scandal at retailer Americanas and financial trouble at power company Light earlier in the year.
In the latest sign investor demand is recovering, pulp and paper company Suzano came to the market with a BRL2 billion ($411 million) debenture issue on Friday. It follows sales in recent weeks by telecommunications firm TIM, sanitation company Aegea and power company Eletrobras.
“The market is already moving toward normalization,” said Alexandre Muller, a portfolio manager at Rio de Janeiro-based JGP, told LatinFinance. “Funds registered their first positive flows in the private credit market in August. The primary market has registered monthly issuance of more than BRL5 billion per in the past three months,” he said.
The sales have included debentures, agribusiness receivables certificates known as CRA, real estate receivables certificates known as CRI, and receivables investment funds known as FIDC.
Spreads went from a low 1.9% at the beginning of the year to a peak of 3.1% in March and have now fallen back to 2.4%, Muller said.
“There are clear signals that the offer of private credit is coming back,” said Ricardo Carvalho, managing director, corporates at Fitch Ratings agency, in a podcast last week. “There has been a clear recovery and we expect further progress in domestic issuance in the third and fourth quarters of the year,” he said.
The recent sales by large issuers such as TIM and Aegea are a sign the market is on firmer ground, Muller said. Local infrastructure bonds have also attracted retail investors, who enjoy income income-tax exemptions. “Banks say the pipeline for such tax-free debentures is solid towards the end of the year,” he added.
Frequent issuers such as car rental company Localiza and petrochemical company Braskem that stayed away from the local and international markets in the first half of the year are now returning, Muller said.