With just one LatAm new issue since Russia invaded Ukraine, LatAm bond bankers have spent most of the last month looking at goings-on to the east.
Recently, they started to spot encouraging signs. Single-B Nigeria and Turkey issued last week, and then the Philippines and Indonesia raised dollars at the start of this week. Surely, surely, someone from Latin America could be tempted?
Alas, not quite yet. Just as it seemed EM bond markets had digested the war in Ukraine, along came Jerome Powell on Monday to spook the Treasury markets, with the 10 year shooting up 25bp in just a couple of days. One LatAm DCM head toldGlobalCapital that the market was “back to square one” after this week’s volatility.
“Possible issuance windows are just getting shorter and shorter,” said the DCM head.
Even if windows do start to appear, the hunt goes on for a LatAm borrower both strong enough to re-open the market but with needs urgent enough to issue amid the uncertainty. Most corporates are in no rush to turn to international bonds as they are leaning on still functioning domestic markets and a bank market that has barely repriced, said another DCM banker as he lamented a number of postponed mandates.
This leaves sovereigns. Yet the obvious LatAm sovereign candidates wrapped most of their funding needs before the war began. And Congress in one of the remaining potential issuers, Peru, is busy trying to impeach the president. Again. This week we covered S&P’s decision to downgrade the sovereign on the back of “persistent political deadlock”.
Colombia’s absence, with the sovereign yet to get started with its $3bn of slated external market funding needs despite looming elections, remains a hot talking point — as it has for several weeks. Latest rumours are that the government is not keen to validate high yields. But on Thursday night — after a remarkable 684-minute goal drought — the Colombian football team scored not just one but three goals in a vital qualifier against Bolivia. So anything’s possible.
Love me tender
One potential issuer did emerge, however, from the trio of Latin American corporates that launched tender offers for old bonds this week.
First, Brazilian pulp producer Klabin’s buyback announcement got at least one observing syndicate banker prematurely excited; it would have been an ideal re-opener. But then it became clear that the buyback will be financed by Klabin’s growing cash pile. Similarly, Colombian lender Banco de Bogotá will use cash to buy back its 2027s.
However, Peruvian transmission company Consorcio Transmantaro has made the buyback of its 2023s contingent on a new issue. A quite infrequent borrower whose biggest deal ever is only $450m would not be the most obvious candidate to re-open a shaky market, but Transmantaro does at least boast an IG rating (Baa3/BBB) and strong ownership from Colombian quasi-sovereigns ISA and GEB.
Still, even Transmantaro itself is not taking anything for granted. The tender explicitly states that “no assurance can be given that the new [bond] offering will be priced and settled on the terms currently envisioned or at all”.
Yet another tango in Paris
Argentina, of course, is a long way from ever issuing a new bond. But it could never be accused of being a boring credit for investors to follow. This week, eyes were on finance minister Martín Guzmán’s trip to France to deal with the March 31 deadline by which Argentina was supposed to have solved the issue of its almost $2bn of debt to the Paris Club group of bilateral lenders.
As he did on his last visit to Paris in June 2021, Guzmán emerged with another agreement to extend the renegotiation deadline, this time to June 30. It was another item crossed off the minister’s to-do list as he juggles Argentina’s various debt commitments, and the next big day should be Friday, when the IMF executive board will meet to — assuming no last-minute hiccups — approve the country’s new $45bn extended fund facility. Though considered a credit-positive, however, the Paris deal was not enough to reverse recent losses in government bond prices.
Have a great weekend, and do get in touch for a free trial to access all of GlobalCapital.
Saludos,
Olly
This is GlobalCapital's LatAm Letter written weekly by Latin America reporter Oliver West. If you enjoy it, sign up for free in a matter of seconds here and feel free to pass it on to colleagues and contacts.
The best of this week’s LatAm bond coverage: