Latin America

Grupo Axo, the Mexican fashion retailer, sold $325m of five year notes on its international bond market debut on Tuesday, tightening the price as bankers said Latin America bond markets were in a sweet spot for new issuance.

Moody’s has placed Peruvian miner Compañía de Minas Buenaventura’s B1 rating on review for downgrade, just as the company prepares a debut bond issue to repay a tax liability that has sharply increased its debt.

Latin American bond bankers expect several new deals to be announced after the May 31 Memorial Day holiday in the US, as borrowers look to get ahead of potential noise regarding the Federal Reserve tapering its policy stimulus. But investors appeared ambivalent this week about the prospect of a wave of new supply.

The Dominican Republic is likely to return to bond markets shortly with a local currency deal, after launching a tender offer for old bonds that is contingent on a new issue. Citi and JP Morgan are managing the liability management exercise — their fourth consecutive mandate with the Caribbean sovereign.

Chile, Peru and Colombia — previously hailed by EM investors for orthodox economic policymaking — are under pressure amid social unrest and political polarisation. But as the upheaval whirls around them, their credit in the bank with bondholders, after years of impressive debt management, is a major asset.

A majority of shareholders of Peruvian mining company Compañía de Minas Buenaventura have approved a motion to allow the company to sell up to $550m of bonds as it looks to finance a retroactive tax liability.

Grupo Axo, the Mexican fashion retailer, began investor calls on Monday ahead of a possible international bond debut that is being marketed just days after BlackRock made a $45m equity injection into the privately held company.

Political volatility continues to take its toll on the credit ratings of Latin America’s strongest sovereigns, with Peru the latest to suffer a negative outlook as Moody’s predicted the next government will likely face a continuation of the political gridlock that has hampered economic activity over the last four years.

Official and multilateral lenders are taking a lenient stance on perennial defaulter Argentina but bond investors are increasingly sceptical whether the IMF programme that the sovereign says it wants will turn its fiscal position around. Markets are pricing in another default within a few years, despite a rebound in bonds this week, while eccentric policy decisions continue to frustrate bondholders.

Colombia’s credit rating was finally downgraded to sub-investment grade on Wednesday evening, as many had expected it to be. But it was Standard & Poor’s — not Fitch, as most had anticipated — that moved first.

Peruvian mining company Minsur, which will shortly begin operations at a copper project that almost triples its previous size, has signed a loan with two international banks to finance a buy-back of old bonds. The liability management exercise comes as the leading candidate in Peru’s presidential elections said he wanted to raise taxes and royalties on the mining sector, and nationalise the country’s wealth.

Argentine sovereign bonds rallied for a third consecutive day on Tuesday amid expectations that the Paris Club group of official creditors will show leniency over a looming $2.4bn payment. But some in the market saw more value in the country's provincial bonds, and the Province of Buenos Aires hinted after the close that it is edging closer to agreement with its bondholders after more than a year in default.