Corporate issuers from Latin America will likely hold off on new cross-border bonds, due to market volatility after UK voters chose to leave the EU, sources told LatinFinance.
Mexican real estate developer Grupo GICSA finished roadshows with JPMorgan and Santander earlier this month, ahead of a potential Rule 144A/Reg S deal, while the province of Salta in Argentina hired Citi and Deutsche Bank to conduct investor meetings.
Global markets had priced in the UK staying in the EU but they were caught off guard as trading commenced on Friday, one banker said.
“People underestimated the possibility of Britain leaving the EU,” he said. “Now deals in Latin America will have to be held with all this volatility.”
Brazil, Colombia and Mexico’s existing sovereign bonds were trading 15bp wider on Friday morning. Ten-year US Treasury notes widened to as much as 174bp after the results came in, but they rallied late on Friday to around 157bp.
Investment grade issuers might be opportunistic, particularly in North America, but Latin American credits will likely be reluctant to tap the capital markets this week, a second banker said.
“While the US is well positioned, this is not something that can be swept under the rug,” the second banker said. “Markets initially reacted well to a remain vote, but now with volatility high again very few investors will entertain a LatAm deal this week.”
Other Latin American deals in the pipeline include Petrobras Argentina, which mandated Citi and Deutsche Bank to lead a potential 10-year bond sale. Argentine confectioner Arcor is on the road this week with Itau BBA, JPMorgan and Santander ahead of a possible 10-year bond sale for $300m to $350m.
Brazil’s finance ministry said in a statement last Friday that it was prepared to withstand periods of global instability thanks to international reserves and robust economic fundamentals.