Investors are plunging into Latin American capital markets, and a host of issuers are pushing ahead with plans to take advantage of strong demand, undeterred by the global turmoil of recent weeks.
Latin companies have stayed on the capital raising trail, showing that risk appetite, though dented, has not gone. Cerveceria Nacional Dominicana, the biggest brewing company in the Caribbean, took to the road last week with a $270 million seven year non-call four 144A offering, rated B1/B and led by Citigroup.
Gol Finance, the financing arm of Brazil 's no-frills domestic airline, Gol Transportes Aereos, sought funds with a $200 million, 10-year bond rated Ba2/NR/BB+, led by Morgan Stanley (sole bookrunner) and Citigroup.
After a turbulent week in equity and local debt markets, regional assets have begun to steady, as currencies recover in value, drawing in investors broadly supportive of the region’s fundamentals.
Heightened global risk aversion also failed to impact Mexico ’s successful debt exchange on Thursday. The sovereign enticed enough investors to swap $2.66 billion of dollar and European bonds into peso-denominated securities, despite the fact that the peso lost 5% of its value over the last two weeks.
A banker involved in the deal, described the Mexico deal as “a statement of confidence” by investors, as the sovereign pushes ahead with regional trend of innovate liability exercises. He believes that investor confidence has not waned. “Investors don’t just look at peso data but have to view this in the long term context.”
He pointed out that the effects of a US economic slowdown – a major factor behind the market turbulence – would not be limited to Latin America: “We will see revaluation but it will affect the rest of the world just as much as Latin America .”
Jorge Cantonnet, chairman and chief executive of investment firm Global Capital Networks, argued that the correction was much needed as it has helped skim the froth off the markets. “The large scale capital inflows have been unsustainable and carry trades are now subject to a long overdue correction,” he said.
Omar Borla, research analyst at Dresdner Kleinwort, was similarly upbeat. “The region, but especially Mexico , is having a life of its own. Better fiscal management and surpluses means any volatility can be absorbed domestically due to the improvement of local capital markets with there now being a lot of room for bank to offset an increase in interest rates”.