South America

Chile has tightened price guidance on the first bond from Latin America this year, a 10 year euro-denominated deal, to 115bp area over mid-swaps.

Fitch downgraded Odebrecht Offshore Drilling Finance (OODF) from B- to CCC on Monday, highlighting its concerns that the Brazilian issuer’s discussions with bondholders could lead to a restructuring of its bonds.

Reports on Friday that the Argentine government would begin negotiations with holdout bond investors on Wednesday sparked buying in the nation’s bonds as the sovereign — rated Caa1/CCC+/CCC rated and still in default — proves an unlikely beacon of stability in Latin America.

After three consecutive years of record volumes, in 2015 Latin American bond market momentum was halted by crises in Brazil and plunging commodity prices. Though volatility will continue and issuers and investors often struggle to meet on price, the market looks mature enough for a modest recovery in 2016. Oliver West reports.

Masisa, the Chilean woodboard producer, is looking to buy back up to $100m of its 9.5% 2019s as part of its attempts to reduce debt in reaction to a rapidly increasing leverage ratio.

Despite the currency tanking against the dollar in 2015, investment in Brazilian real denominated medium term notes is at a healthy level.

Argentine sovereign bonds hit highs for the year on Monday after the US court-appointed mediator in the holdout dispute said that the country’s secretary of finance and vice-chief of cabinet would return to New York to negotiate with bond investors in the second week of January.

Movements in Pacific Exploration & Production’s share price left investors confused after the company announced it had brought in Lazard as a financial advisor and was seeking covenant relief on its loans.

Bad news seems determined to afflict Brazil until the very end of the year as Joaquim Levy’s resignation on Friday sent bonds to new lows with much of the market in holiday mode.

For most observes it had already become a matter of time. Standard & Poor’s had already made Brazil a sub-investment grade borrower and both Fitch and Moody’s had Latin America’s largest sovereign on review for downgrade.

Good news from the US Federal Reserve — in the form of a more dovish rate announcement than some market participants had expected — brought a sanguine close to a turbulent week for credit derivatives and boosted equity markets, but only added to the pressure on emerging market countries and their currencies.

MTN investors are speculating that the huge yield available on Argentine peso bonds may be worth the risk of buying bonds denominated in a currency which is undergoing official devaluation.