Latin America

Two Colombian oil exploration and production companies began deal marketing on Monday as bankers and investors said that continued social unrest and political volatility in the country will not stop bond buyers from putting cash to work.

Sell-side bankers say there could be up to 12 new issues from emerging market issuers this week as borrowers look to capitalise on extremely strong market conditions ahead of expectations that the Federal Reserve will cut its bond buying later in the year. Inversiones Latin America Power, one of the largest wind generation companies in Chile, was one of four LatAm companies to announce deal plans on Monday.

The Central American Bank for Economic Integration (Cabei) is working to develop a regional bond market that it hopes will broaden the investor base for Central America’s sovereigns, some of which have patchy access to global markets. Cabei’s CFO told GlobalCapital that the supranational will provide seed capital for a fund to participate in the market, which he believes could eventually attract foreign buyers.

Brazilian steel producer CSN and Mexican building materials company Cemex continued a storming week for Latin American high yield issuance with new deals that attracted bumper orders and priced tight to bankers’ expectations — even if comparable deals were not always clear cut.

Emerging market borrowers are flocking to the primary bond markets as ever more participants predict the US Federal Reserve will begin tapering its monetary stimulus, something that traditionally rings loud alarm bells for the asset class.

Brazilian government-owned oil and gas giant Petrobras took advantage of a buoyant market on Wednesday to clean up the long end of its curve, shrugging off political concerns with a new 30 year bond that came well inside fair value and left no doubt about the quality of funding conditions for Latin American issuers.

Brazilian oil and gas company PetroRio accessed bond markets on Wednesday just eight months after it pulled an earlier deal, with observers crediting the company’s success to an improved credit profile, enhanced note structure, higher oil prices and better bond market conditions.

Mexican building materials company Cemex is looking to sell a perpetual hybrid bond that it believes will help it towards its target of building an investment grade capital structure.

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.