Central America

Mexican lender Crédito Real on Monday became the first Latin American non-bank financial institution (NBFI) to tap international bond markets since the coronavirus pandemic began as it raised $500m of seven year debt.

Mexican non-bank lender Crédito Real began investor calls on Wednesday as it looks to take advantage of highly liquid bond markets to partially refinance a bond maturing in 2023, and simultaneously align the covenant packages on all of its senior unsecured bonds.

Nueva Elektra del Milenio, the company that operates the retail store and money transfer businesses of Mexico’s Grupo Elektra, will begin virtual meetings with bond investors on Wednesday as it looks to sell a senior secured bond collateralised by remittance flows originated in the US.

Mexico reopened the international bond market for EM borrowers on Monday by issuing the first Formosa bond from a Latin American sovereign in response to interest from Asian investors.

Mexico returned to familiar territory by becoming the first Latin American borrower of the year to issue bonds on Monday. The format, however, was less familiar, as the 50 year SEC-registered $3bn bond — launched at around 11am New York time — will be listed on the stock exchanges of both Luxembourg and Taipei.

Despite funding stresses in certain Latin American countries, bond markets will continue to help the region with its financing needs. For now, this eases the pressure for reform and fiscal consolidation, but issuers must eventually face up to political and social turbulence. Oliver West reports.

The Inter-American Development Bank (IADB) said on Wednesday that it would mobilise $1bn of resources to support Latin American and Caribbean countries in their efforts to acquire and distribute Covid-19 vaccines, as analysts warn most of the economic benefits from vaccinations may only reach Latin America in the second half of 2021.

Costa Rica’s finance ministry said on Monday that it planned to begin discussions over a new $1.75bn IMF programme in the second week of January. But though an agreement would likely drive a rally in the sovereign’s bonds, Fitch Ratings warned it would not remove debt sustainability pressures.

Standard & Poor’s cut Braskem Idesa’s credit rating from B+ to B on Friday, placing the rating on negative watch as the Mexican government’s termination of a gas transportation contract disrupted the polyethylene producer’s operations. The rating agency warned the company needs to address its gas supply shortage urgently, but some credit analysts eye a buying opportunity.

Guatemala has settled a long-running legal dispute with Florida-based Teco Energy, allowing it to pay bondholders and avoid defaulting on an international bond.

Central American sovereign Belize could be at risk of requiring yet another rescheduling of its bond payments, said analysts, as its debt reaches unsustainable levels and with the temporary relief that creditors granted earlier in the pandemic likely to be insufficient.

Guatemala’s international bonds prices finally reacted this week to its failure to make a November 3 coupon payment amid a legal battle with a US energy company. But the Central American government’s public credit office says a solution is imminent and bondholders appear confident that default will be avoided.