LatAm corporate bond market seen robust despite 'hiccup'

Debt market participants insist that 2013 will still be a good year for Latin American corporates despite a slowdown in the new issue market

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Brazilian oil services group Schahin (BB+/BB-) launched a deal on Thursday through Citi, Deutsche Bank, HSBC and Mizuho but could not come to an agreement with investors on price. Schahin had indicated initial price thoughts of high 6%-7% for a seven year that was expected to total $700 million.

J&F, the holding company of Brazilian meat firm JBS, had mandated Banco do Brasil, Barclays, Morgan Stanley and Santander to lead a B/B+ rated bond due in 2020. But the issue failed to appear last week.

Order book sizes had gradually been reducing from the extraordinarily high levels seen earlier in January — described as a “DisneyWorld” fantasy by one syndicate banker.

Brazilian airline Gol’s $200 million bond also performed poorly in the secondary market after pricing last Thursday.

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Bankers indicated earlier in the week that borrowers could be put off by under-performing deals. But there is nonetheless cause for optimism, according to market participants.

“In the bigger picture, the market is still strong, we’re just in a little bit of a hiccup,” said one syndicate banker. “I think we’ll be fine.”

Moreover, the macroeconomic outlook should be conducive for issuance.

“Our general expectation is still that the current rate environment, coupled with improved GDP across the region, will continue to drive investor sentiment towards Latin American debt and especially high yield debt,” said one corporate finance analyst at a rating agency.

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