LatinFinance - January/February 2016 - 18

Alejandro Díaz de León, then the head of public credit in Mexico,
decided it was prudent to tap the dollar capital markets ahead of the
possible hike.
"It was very important for us to finish our external funding needs
early on in the year, and to cover those external funding needs that
we had. We basically tried to go first to the dollar market," Díaz de
León says.
Consequently, the United Mexican States hit the bond market
early, raising $3.5 billion in January 2015 through a tap and new
issue. After locking in country's dollar funding, the sovereign was
free to pursue debt in other currencies. With a fresh round of
quantitative easing in Europe, the sovereign later walked away with
a euro note that marked its third century bond.
Adding value
With the steady stream of dollar-denominated bond sales driving
business long gone, Latin American debt capital markets teams
are looking to more niche products. More structured deals, such
as securitizations and green bonds, are likely to become more

SANTIAGO RUBIN, GOLDMAN SACHS

"FOR MANY YEARS, CORPORATES
AND FINANCIAL SPONSORS
DEEMED LATIN AMERICA
EXPENSIVE, BUT NOW WITH
CURRENCY DEVALUATION
THROUGHOUT THE REGION,
THEY ARE RETHINKING THEIR
INVESTMENT STRATEGIES AND
VIEWING THE REGION MORE
FAVORABLY"

Source: Flickr/Charles Cook

"Structured products and project bonds will be a strong theme
for 2016," he says.
BAML's Volkov agrees: "Green bonds continue to get acceptance.
It did help issuers compress their new issue levels, because there
was a solid and captive demand from pure green investors."
Nafin's bond was the third green bond to be issued from Latin
America, following BRF's 2.75% €500 million 2022 sold in June, and
Energía Eólica's 6% $204 million 2034 green project bond sold in
late 2014.

GOING GREEN: Issuance of green bonds, which
back environmentally friendly operations, is
set to rise

prevalent, sources say.
Already a handful of regional issuers have sold green bonds.
Most recently, Mexican development bank Nafin sold a 3.375% $500
million 2020 green bond in October. Around half the buyers were
dedicated "green" funds, or managers with mandates to invest in
environmental friendly financial products.
These products have grown considerably in the US, and the trend
is likely to continue, says José Padilla, head of capital markets for the
Americas at investment bank Daiwa in New York.
"We learned from the Nafin deal that we can be competitive
on investor diversification and pricing with socially-responsible
investment products. That is a growing market, it's not something
that is going to fade away soon," Padilla says. Growing numbers of
investors with SRI mandates means pricing can be competitive, he
adds.

18 L ATINFINA NCE.COM - January/February 2016

Equity's expanding reach
In a long-awaited initial public offering, Mexican auto-part maker
Nemak raised 12.36 billion Mexican pesos ($758 million) of capital in
June. The IPO was the largest of a smattering of listings out of Latin
America last year, but it points to a trend for equity markets that is
expected to continue.
"Mexico is growing, Brazil is not," says Santiago Gilfond,
managing director and head of Latin America equity capital markets
at Credit Suisse. "There is excitement around economic reforms
- Mexico has less exposure to China and commodities in terms of
trade and this has benefitted Mexico. This dynamic will continue to
play out."
Still, equity investors were bearish on Mexican stocks last year,
also. That is perhaps unsurprising given regional fund performance
figures. Latin America equity funds lost some 27% over the year,
according to Lipper data released on December 17.
Just eight Latin American companies listed last year. Seven were
Mexican and one, Brazilian. While the tally is up on 2014's six IPOs,
it is far lower than the annual average of 20 offerings between 2010
and 2013, according to Dealogic data.
Just as structured transactions could bolster flagging bond flow
business, equity bankers are hopeful that new products and trends
will spur their dealmaking.
The rise of a regional Latin American buyer base might offer
some counterpoint to a flagging US bid. Corpovael Inmobiliaria, or
Cadu, put that to the test in December.
The homebuilder was the first Mexican company to offer new
stock over the Latin America Integrated Market (Mila) platform. That
allowed investors in Chile, Colombia and Peru to buy the shares with
less paperwork, in a manner more akin to a local offering.
The move could set a precedent for more issuances on Mila,
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Table of Contents for the Digital Edition of LatinFinance - January/February 2016
