LatinFinance - January/February 2015 - 6

NEWS
BONDS

A corruption investigation derailed issuance in Brazil, despite the
country's new economic leadership coming into view. Borrowers
from other parts of the region fared better. By Eduardo García

Petrobras jitters
Brazilian state oil company -
and the country's biggest debt
issuer - Petrobras postponed
the release of its audited
third-quarter results in midNovember amid investigations
into corruption allegations,
sending shockwaves through
the debt markets and pushing
issuers to the sidelines.
Volatility increased as the
investigations spread to
some of Petrobras' Brazilian
construction contractors.
Investors welcomed the
nomination of Joaquim Levy
as finance minister in late
November, although it was not
enough to calm the storm. The
former head of Bradesco Asset
Management vowed to tighten
fiscal policy, but investors
noted he has a long way to go
until he meets his ambitious
targets.
A planned bond from
Marfrig became a victim of the
Petrobras affair. The Brazilian
food producer was forced to
pull a $600 million bond sale
intended to finance a liability
management exercise in late
November. The B2/B+/B rated
borrower said investor demand
was insufficient to meet its
pricing expectations, but that it
was likely to return to the deal
once conditions improve.
JBS' planned liability
management exercise suffered
the same fate in mid-December.
The protein company pulled a
$750 million 2025 bond after
issuing initial price thoughts
of 6% to 6.25%. "You see ugly

headlines about the scandal
and people don't yet have an
understanding of how far it
extends, what companies may
be involved in it or may be
affected by it, and as a result,
the market is becoming very
illiquid," a market source said
at the time.
Not everything was
sidelined: Rio de Janeiro state
pension fund Rioprevidência
was able to sell its second
securitization this year, a
$1.1 billion 2027 deal in midNovember, just as Petrobras
concerns gathered steam.
But the Brazilian market was
expected to stay muted for
several weeks, with borrowers
likely to wait for calm before
proceeding with new issues,
sources said.

Chilean comeback

Outside Brazil, conditions were
better. The Republic of Chile
returned to the euro market in
early December. The Aa3-/AA-/
A+ rated sovereign sold a €800
million ($985 million) 2025
bond, increased from the €600
million targeted, in tandem
with a dollar bond that formed
part of a liability management
exercise. The euro tranche was
heavily subscribed, allowing
the borrower to tighten the
pricing over the course of
execution.
The United Mexican States
filed a prospectus in the US in
November to issue bonds with
new collective action clauses
that follow recommendations

6 L ATINFINA NCE.COM - January/February 2015

DCM rank by volume, full year 2014
Citi achieves dominance
Rank
1
2
3
4
5
6
7
8
9
10

Bookrunner
Citi
HSBC
BofA Merrill Lynch
JPMorgan
Deutsche Bank
BBVA
Santander
Credit Suisse
Goldman Sachs
Morgan Stanley
Total

Value $m
21,493
18,310
15,514
14,206
11,226
10,969
10,552
8,399
7,674
7,481

# Deals
123
113
68
53
47
87
78
38
20
39

183,226

406

Source: Dealogic

by the IMF and the
International Capital Markets
Association. The registration
is part of the sovereign's bid
to meet "best international
practices" in its bond sales,
Alejandro Diaz de León,
head of public credit, told
LatinFinance. The sovereign
priced a heavily-subscribed $2
billion 2025 bond soon after.
Also in Mexico, tortilla
maker Gruma sold a $400
million 10-year bond in
mid-November, in its first
transaction since Fitch lifted
the company from BB+ to BBB-,
while construction supply
company Elementia raised
$425 million in the same tenor.
Among financial institutions,
BBVA Bancomer sold a $200
million 15-year non-call 10 bond
in early November, the second
Basel III-compliant tier two
note sold by a Mexican lender,

in a deal that was four times
subscribed. "We thought that
this was a very good moment
to do an international dollardenominated sale ... given
that US Treasury rates are at a
very low level and next year or
the one after they could start
rising," deputy chief financial
officer Ernesto Gallardo told
LatinFinance at the time.
A string of other financial
institutions raised funds in the
Swiss market, taking advantage
of strong demand for highlyrated Latin American issuers
and improved currency swap
conditions. Chile's
BCI, multilateral
development banks Cabei
and CAF,
and Brazil's
Banco Safra
all issued
For daily updates on
the bond market, visit:
Swiss franc
latinfinance.com
notes. LF
http://www.latinfinance.com http://www.LATINFINANCE.COM
LatinFinance - January/February 2015

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