Latin America

The chief financial officer of Banco Santander México told GlobalCapital that the lender had decided to get ahead of a possible surge in demand for credit by issuing the largest ever bond by a Mexican bank on Tuesday.

The CFO of Banco Santander Mexico told GlobalCapital that the lender had decided to get ahead of a possible surge in demand for credit by issuing the largest ever bond by a Mexican bank on Tuesday. But DCM and syndicate bankers worry that most Latin American issuers are not taking advantage of strong markets to shore up cash positions with the full impact of the Covid-19 crisis still unknown.

Banco Santander Mexico showed that emerging market investors are willing to deploy cash in a greater range of credits than just sovereigns as it sharply increased the size of a five-year senior deal on Tuesday. But though the new issue concession was in line with expectations, the deal underscored the new reality of funding conditions for Latin America borrowers.

Though Ecuador’s curve initially sold off on the sovereign’s request to push back debt payments until August, most analysts and investors expect the cash-squeezed country’s bondholders to offer the government flexibility in its time of need — mostly in an effort to avoid something far worse.

Banco Santander Mexico is hoping to become the first Latin American company to issue internationally in six weeks on Tuesday after speaking to investors on Monday about a potential senior unsecured trade.

With emerging markets across the globe facing an overwhelming liquidity squeeze, the IMF said on Thursday that it would “look for solutions that can unlock critical financing” in countries where the unsustainability of debt prevented the fund from lending, potentially increasing funding options for the most stressed of countries.

Argentina’s move to suspend domestic law bond payments for the rest of the year encouraged holders of its foreign law debt, some of who are beginning to spy value in the battered curve.

Though Ecuador was already late on debt payments and bondholders were already expecting to be asked to agree to delay coupons, the cash-squeezed sovereign’s bond curve sold off sharply after the government launched a consent solicitation to that end on Thursday afternoon.

Mexican petrochemicals company Grupo Idesa is giving bondholders more time to participate in a distressed debt exchange, saying that the “current environment” had hindered the ability of the bonds’ "custodians" to tender.

Rating agencies have continued their policy of taking swift action on Latin American governments as Standard & Poor’s removed its positive outlook from Brazil, the region’s largest economy, citing political opposition to President Jair Bolsonaro as a key reason.

For now, at least, Argentina appears to be asking its domestic bondholders to take the brunt of the government’s efforts to ease cashflow worries amid the Covid-19 crisis, providing upward momentum to foreign law debt prices.

As investors single out Mexico’s response to Covid-19 as one of the least convincing in Latin America, Fitch threw government-owned oil company Pemex and its $80bn of bonds deeper into sub-investment grade territory on Friday.