LatinFinance - January/February 2015 - 20

BONDS
YEN
LIQUIDITY

An expansion in yen liquidity and a likely rise in dollar borrowing
costs means more regional credits are tapping Japanese investors. But they
are limited by tenor, size and geography. By Eduardo García

Reaching out

20 L ATINFINA NCE.COM - January/February 2015

©REUTERS

L

atin American bond
issuers have long treated Japan as a niche
market. But a combination of a more inviting climate within Japan and expectations
for a pricier US market is encouraging a
step-up in Latin issuers' presence there.
A handful of issuers broke new ground
in yen last year, paving the way for others.
Mexico priced a heavily subscribed threetranche Samurai deal in July, becoming the
first emerging market credit to sell a 20year yen bond since the 2008 global crisis.
Banco Santander Chile became the first
regional issuer to test the pro-bond format.
European and other Asian issuers have
already jumped at the opportunity, taking advantage of links with Japan in a bid
to diversify their investor base and secure
funding at competitive prices.
An economic stimulus program, ramped
up late last year to bring the bond-buying
program to ¥80 trillion ($670 billion)
annually, has pushed Japanese rates to an
all-time low. That has sparked a more adventurous spirit among local investors, who
are looking outside Japan in their search
for yield.
The friendlier Japanese environment
comes at a pivotal time for Latin American
issuers, who are facing potentially more
expensive borrowing in the US. With the
expectation that the US Federal Reserve
will raise rates toward the end of this year

JOINING THE PARTY: Japanese Prime
Minister Shinzo Abe and Mexican President Enrique Peña Nieto

or early next year, access to a wider variety
of currencies will help contain international
funding costs.
"Our strategy is to diversify, so if a particular event affects a market, we will always
have other windows open," says Santander
Chile's chief financial officer, Emiliano
Muratore. He says the bank is exploring
the Australian and Swiss markets as well as
Japan: "We won't be dependent on what
happens in the US, because we will have
three other markets open."
Where there's action
Mexico's ¥60 billion ($590 million) tripletranche Samurai transaction in July locked
in the country's best-ever financing rates,

in any currency, in five-, 10- and 20-year
maturities. Yields ranged from 0.8% for the
five-year tranche to 2.57% for the 20-year
note.
Mexico intends to remain active in Japan,
says the head of public credit, Alejandro
Díaz de León. "We will continue looking at
our main market, the dollar market, and
will monitor very closely the euro and yen
markets because we think they will offer us
good alternatives looking forward," he says.
Having worked on Samurai issues from
Tunisia, Poland, and Mexico, among others, Nomura's head of international debt
syndicate Takaomi Tahara knows the Japanese market for offshore names well. He
agrees that issuing in yen could help Latin
American borrowers broaden their investor base. "By tapping the Japanese market,
issuers can diversify their funding sources,"
he says. What's more, "Japanese investors
tend to hold their bonds for a very long
time, just like equity investors, so [issuers]
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