South America

Consensus is growing among investors and analysts that default is inevitable for Venezuela, as oil hits lows not seen in more than a decade.

Energy investor EIG said that bondholders of Colombian-Canadian oil firm Pacific Exploration & Production faced a “de minimis” recovery after the company said on January 15 that it would not make scheduled coupon payments this month.

Colombian state owned oil company, Ecopetrol said it wanted to reiterate its commitment to cost cutting and protecting its cash flow after Moody’s left it perilously close to losing one of its investment grade ratings.

Heavily indebted Colombian-Canadian oil company Pacific Exploration & Production disappointed some bondholders on Friday by announcing it intended to miss coupon payments due this month and use the 30 day grace period “to assess strategic alternatives”.

Latin America’s best-rated sovereign reopened the region’s capital markets this week with a dual-currency trade that showed large financings are still on offer — though it also provoked debate over issuance strategies in tough markets.

Bankers say that at least two sovereigns from Latin America are considering announcing deals on Wednesday after Chile brought some much needed new issue action to the region on Tuesday.

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.