The cross-border market for Latin American corporate issuance could remain relatively subdued in 2024 as buyers and sellers gauge the outlook for US rates, according to analysts.
The international market for the region’s corporate issuers is going to be “very quiet” compared to previous years, Paula La Greca, senior corporate research analyst at TPCG Valores in Buenos Aires, told LatinFinance.
While the first two weeks of 2024 saw a flurry of corporate deals, including sales by Argentina’s YPF, Colombia’s Ecopetrol and Peru’s Banco de Crédito, La Greca said the market is unlikely to take off unless there is a shift in expectations for borrowing costs.
“It would be better if the context changes, that is, if the Fed keeps the interest rate the same or begins to cut,” she said. “If the market has an expectation that the Fed will lower rates, that automatically changes the perspectives, conditions and perception of risk.
For 2024, La Greca sees more interest among corporates for liability management rather than funding new investments.
“Latin American companies have had very good performance in recent years and have generated a lot of cash.Eventually in 2025, 2026 there will be issues to finance investment projects,” she added.
Among the companies that could come to the market to refinance upcoming maturities include Argentine power company MSU Energy, natural gas pipeline operator Transportadora de Gas del Sur (TGS), Brazilian airlines Azul and Gol as well as Gran Tierra, a Canadian oil and gas producer with assets in Colombia and Ecuador, according to La Greca.
SECOND BITE
State-owned YPF, the largest oil and natural gas producer in Argentina, could also return to the market by the end of 2024 to refinance outstanding notes that come due next year, she said.
One Miami-based credit strategist said he sees more investment-grade issuers tapping the market in the short term followed a couple of months from now by those with speculative grade ratings.
Potential investment grade issuers include Brazilian steelmaker Gerdau, pulp and paper makers Klabin and Suzano, Mexican beverage and retail group Femsa, auto parts manufacturer Nemak and petrochemical company Alpek, he said.