LatAm Bonds

Latin American corporates finally arrived in the new issue market last week for the first time in 2015, but bankers say the region will struggle to reach 2014’s record new issue volumes as the pipeline remains light.

State-owned oil giant Pemex last week became the first company in Mexico to take advantage of a new agreement between the finance ministry and Euroclear that allows international investors to buy domestic debt issued by Mexican corporates.

Latin American issuers will continue to have to pay higher than usual new issue concessions to raise new debt, said LatAm bond bankers this week as Chile’s Cencosud and Peruvian Intercorp become the first pure corporates from the region to issue this year.

State-owned oil giant Pemex has become the first company in Mexico to take advantage of a new agreement between the finance ministry and Euroclear that allows international investors to buy domestic debt issued by Mexican corporates.

Latin American issuers will continue to have to pay higher than usual new issue concessions to raise new debt, said LatAm bond bankers this week as Chile’s Cencosud and Peruvian Intercorp become the first pure corporates from the region to issue this year.

LatAm DCM bankers were surprised and impressed that Argentine oil company YPF raised $500m of new debt this week with the sovereign default unresolved and oil prices falling. But the smaller than planned size and hefty new issue premium mean few are expecting a burst of new issue activity from the country, despite the City of Buenos Aires preparing to meet investors.

Argentine oil and gas company YPF provided the Latin American bond market with its toughest test of 2015 on Wednesday. Although the state owned company did not raise as much money as initially hoped, the deal at least showed investors were willing to lend more money to Argentina ahead of the City of Buenos Aires’ imminent visit to international bond investors.

Peruvian conglomerate Intercorp attracted $1.8bn of demand for a $250m 10 year bond on Wednesday to show Latin America’s corporates that there is plenty of pent-up demand among investors despite market volatility.

EM bond investors were confident that Argentine state-owned oil and gas company YPF would successfully price taps of two of its existing notes on Wednesday after offering an “interesting” concession to its curve.

Volatility as a result of the Petrobras corruption scandal has shut Brazilian issuers out of capital markets since November. The government has a duty to the private sector to reopen bond markets by issuing — and now is a great time.

Plummeting oil prices may have savaged US sub-investment grade bond markets and led to contagion in LatAm high yield, but cheaper fuel is a bonus for Mexican transportation company Grupo Senda that should help the company reopen the market for high yield LatAm corporates this week.

Moody’s raised concerns on Friday that Brazilian state-owned oil company Petrobras could lose its investment-grade status after the rating agency cut the Brazilian borrower from Baa2 to Baa3 and kept the rating on review for further downgrade.