LatAm Bonds

Poor secondary trading, primarily as a result of low oil prices, has raised doubts over whether certain names that Latin American bond bankers were expecting to issue during January will approach the market.

Colombian state owned oil company, Ecopetrol said it wanted to reiterate its commitment to cost cutting and protecting its cash flow after Moody’s left it perilously close to losing one of its investment grade ratings.

Heavily indebted Colombian-Canadian oil company Pacific Exploration & Production disappointed some bondholders on Friday by announcing it intended to miss coupon payments due this month and use the 30 day grace period “to assess strategic alternatives”.

Latin America’s best-rated sovereign reopened the region’s capital markets this week with a dual-currency trade that showed large financings are still on offer — though it also provoked debate over issuance strategies in tough markets.

Lat Am bankers said that the 15bp-20bp new issue concession achieved by Mexico in its first deal of the year was unlikely to be bettered by anyone soon after the sovereign raised $2.25bn in a tough market.

Two leading Latin American sovereigns showed that there is plenty of cash in the market for well-known investment grade borrowers this week, but other issuers in the region looking to raise financing should not expect new issue concessions to compress.

There may be a new man in charge at the Mexican debt management office, but bankers were just as effusive as ever over its $2.25bn of 10 year bond, its first issuance of 2016, on Wednesday.

Bankers say that at least two sovereigns from Latin America are considering announcing deals on Wednesday after Chile brought some much needed new issue action to the region on Tuesday.

Chile has tightened price guidance on the first bond from Latin America this year, a 10 year euro-denominated deal, to 115bp area over mid-swaps.

Fitch downgraded Odebrecht Offshore Drilling Finance (OODF) from B- to CCC on Monday, highlighting its concerns that the Brazilian issuer’s discussions with bondholders could lead to a restructuring of its bonds.

Reports on Friday that the Argentine government would begin negotiations with holdout bond investors on Wednesday sparked buying in the nation’s bonds as the sovereign — rated Caa1/CCC+/CCC rated and still in default — proves an unlikely beacon of stability in Latin America.

Latin American syndicate bankers are crossing their fingers for a period of calm in global markets in order to allow the region’s borrowers to kick off their international funding for 2016, with sovereigns dominating the pipeline.