LatAm Bonds

Corporate debt from Brazil was among the worst performing sectors in LatAm this week, said traders, as the fallout from a corruption investigation at Petrobras threatens to halt new issue supply from Latin America’s largest economy.

New collective action clause language used by Mexico in its latest bond issue should make sovereign restructurings much easier, said the borrower, but there is still no evidence investors will demand a premium for the changes.

The market disruption as a result of a corruption investigation at Petrobras that saw Brazilian meatpacker Marfrig cancel a liability management exercise on Wednesday (see separate story) should not affect other LatAm credits lining up to issue, said syndicate bankers.

Bankers working on meatpacker Marfrig’s liability management exercise, which was pulled on Wednesday, blamed the fallout from Petrobras’ corruption investigation for the cancellation as Brazilian corporate bond prices suffer.

Alejandro Díaz de León, Mexico’s director of public credit, told GlobalCapital that the sovereign had opted to price a new 10 year benchmark bond on Tuesday despite having already completed its 2014 financing programme because he expects more volatility before the start of next year.

Brazilian meatpacker Marfrig Global Foods will hold another day of investor calls on Tuesday ahead of a planned dollar deal that will be used to buy back existing bonds.

LatAm traders said that spreads on Brazilian state oil company Petrobras’ bonds hit historical wides versus US Treasuries on Friday after the issuer announced on Thursday evening that it would delay publication of its third quarter results due to a corruption scandal.

Three borrowers are aiming to add to already record yearly issuance volumes in Latin America but there is reason for borrowers to hurry to market before the end of the year, say bond bankers.

LatAm bond bankers said Mexico was sensible to include updated collective action clauses (CAC) in its new sovereign bond prospectus, but said the fact that investors were unlikely to demand a premium for the clauses suggested their relevance was limited.

AES Gener-owned Empresa Eléctrica Angamos is planning an $800m 14.5 year amortising senior secured bond to refinance project finance loans, according to sources close to the deal and rating agency reports.

The state pension fund of Rio de Janeiro has mandated BB Securities and BNP Paribas for a possible further $1bn of senior secured notes issue via SPV Rio Oil Finance Trust.

Prospects in the Latin America bond market for universal collective action clauses (CAC) in sovereign bonds that would have avoided the Argentine debt fiasco took a turn for the better this week after Mexico showed its willingness to put ICMA recommendations on the matter into practice.