Mexico

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.

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.

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.

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.

EM bond bankers were feeling relieved after a better day for global markets on Thursday, as they said some of the asset class’s best issuers were lining up deals hoping to clinch much-needed funding.

Mexico petrochemicals company Grupo Idesa on Monday issued a supplement to the offering memorandum on a distressed bond swap as it attempts to avoid default by persuading bondholders to push out the maturity on a $300m bond due in December.

Latin America bonds may not be immune to the generalised improvement in tone in credit markets this week, but that secondary markets remains dysfunctional and a return to primary market action could be some way away.

Mexican petrochemicals company Grupo Idesa is offering bondholders a collateral package and higher coupon to participate in a bond exchange that would allow it to avoid default later this year.

Emerging market bond conditions got worse and worse this week as investors struggled to sell bonds quickly enough to keep up with outflows. Though some investors said they had lined up a shopping list of cheap purchases, it could be some time before they decide to pounce.

Even the top-rated emerging markets corporates are mostly preferring to keep cash on hand rather than take advantage of a sharp fall in bond prices to repurchase debt cheaply, bond bankers said this week.

Latin America bond issuers and investors were thrown deeper into the coronavirus crisis on Monday, with Friday’s spread tightening more than cancelled out as the US Federal Reserve’s surprise 100bp rate cut on Sunday failed to arrest a fall in risk assets.