LatinFinance - July 2013 - 6

Debt

Batten down the hatches
As an EM sell-off halted debt issuance in the cross-border markets But others chose to wait. Odebrecht had been marketing a $1.9
in May and June, niche markets in Switzerland and Japan offered billion dollar drillship contract securitization, but decided to put
a window for LatAm borrowers looking for diversification.
the deal on hold in mid-June.
Would-be dollar or euro issuers were forced to wait out a virtual
shutdown in the broader markets.
While new LatAm names have been able to print in the Swiss
Petrobras was able to jump through an issuance window ahead
franc market, this has not meant the Swiss window is open to
of an uptick in volatility and EM portfolio outflows, emerging
all issuers. Higher yielding credits still face difficulties accessing
with a record-breaking jumbo sale in mid-May. The Brazilian
the market. Brazilian Banco Pine,
sold an $11 billion, six-tranche deal
for example, had to shelve a potential
including 2016, 2019, 2023 and 2043
DCM rank by volume, year to June 14
Swiss Franc deal.
fixed-rate bonds, and 2016 and 2019
HSBC, BAML climb
Banco Santander Brasil turned to
floating-rate notes. The Petrobras deal
Rank
Bookrunner
Value $m
# Deals
Swiss Francs, opting for a 125 million
easily surpassed a $7.5 billion PdVSA
1
Citi
10,629
60
Swiss Francs ($131 million) deal in
bond sold in 2007 to become the
2
JPMorgan
8,446
33
a move to diversify funding efforts.
largest-ever EM transaction. The deal
The new 2015 bond, upsized from a
came as Latin borrowers sharply scaled
3
HSBC
6,560
34
planned 100 million, priced slightly
back their debt capital markets activity
4
BAML
5,843
26
through secondary levels of existing
amid increasingly rocky markets.
5
Deutsche Bank
5,671
28
Swiss Franc bonds while filling a gap in
“Petrobras got out at the right
6
Itaú
4,619
28
the bank’s Swiss Franc maturity profile.
time,” says Jeremy Brewin, portfolio
7
Credit Suisse
4,106
20
And Banco de Chile issued a 225
manager at Aviva Investors. “In the past
8
Banco do Brasil
3,727
16
million Swiss franc ($243 million)
weeks, it has been weaker across EM
9
BBVA
3,520
32
floating-rate bond, pricing the 2016
debt and equities with a broad sweep
10
Morgan Stanley
3,368
13
note at par with a coupon of 3-month
of risk reduction in the emerging
Libor plus 60 basis points.
market sector.”
Total
77,763
204
Mexico finished Japanese credit
Latin American borrowers sold $21
Source: Dealogic
investor meetings, a move that falls
billion worth of debt through 38 deals
in line with its medium- to long-term
from May through June 12, compared
Gapping wider
strategy of tapping the Japanese market
with $12 billion from 44 deals in the
CDX LatAm corporate index
and establishing a regular presence
same period last year, according to
350
there. The sovereign was considering
Dealogic. Petrobras’s jumbo six-tranche
five and 10-year bonds. The meetings
issue in early May contributed to the
300
followed Banco del Estado de Chile’s
uptick in issuance year-to-date.
250
24 billion yen ($253 million) 2018
“After a promising start to 2013,
bond debut which was priced earlier
valuations of emerging market dollar
200
in June, and represented the first Latin
denominated sovereign and corporate
150
America yen bond of the year. The 2018
debt have hit the proverbial wall on
bond was priced at par with a 0.837%
100
increasing market concern that the
coupon, to yield mid-swaps plus 35
US Federal Reserve may begin to
50
basis points. The price comes inside
taper or slow the pace of quantitative
0
the bank’s dollar curve, helped by what
easing measures in effect since 2009,”
people following the deal describe as
says Robert Abad, emerging markets
a very favorable swap environment for
portfolio manager at Western Asset
LatAm issuers.
Management. “With EM poised to
Source: Markit
In other currencies, peers also
exhibit more volatility going forward,
looked at the markets. Banco do Brasil
EM investors should aim for being more selective.”
was planning a euro-denominated bond, and Minerva was
DCM bankers say if market conditions remain volatile,
still heard waiting to see if it could sell a perpetual bond when
issuers will opt to wait for yield adjustments before executing
market conditions improve. Baa2/BBB Brazilian development
transactions. Aviva’s Brewin says issuers will have a tough time
bank BNDES ended two days of investor meetings it described as issuing in the current environment unless they are willing to
investor updates on its financial results and business.
offer a concession to the curve. “Normalization of the curve will
Banco Santander Chile was able to sell a $250 million
happen eventually. We have spreads widening in all products and
floating-rate bond in early June, pricing the 2018 at 187.5 basis
in all emerging markets. It is good that issuers are not coming to
points over Libor, inside of 200 basis points initial price talk.
the market as it is difficult to justify fair value,” he says. LF

6 LatinFinance

July 2013

6/13/13

5/17/13

4/23/13

3/27/13

3/1/13

2/4/13

1/8/13

12/11/12

11/14/12

10/17/12

9/20/12

Petrobras smashes records

LatinFinance - July 2013

Table of Contents for the Digital Edition of LatinFinance - July 2013