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NEW YORK, July 27 (IFR) - Latin American credit markets came close to a virtual standstill on Monday after an overnight rout in Chinese stocks.
Most credits were off intra-day wides, but still weak as Brazilian credit woes, sinking commodity prices and weaker FX gave both investors and borrowers pause.
"Investors see value in the market, but have no reason to go rushing in as we haven't reached the bottom yet," said a syndicate manager summing up the standoff in the primary markets. "And borrowers aren't willing to pay these levels."
Some bankers now think primary issuance activity may not pick up until September as slowing Chinese growth has only added to the malaise affecting LatAm credits following a sharp sell-off in Brazil last week.
The capital markets have shut again for Brazilian issuers amid further uncertainty about the country's economy and whether or not Moody's will assign a negative outlook following a possible downgrade.
Spreads on benchmark names continued to inch wider on Monday with Petrobras 2024s quoted as wide as 508bp, considerably weaker than the 490bp-480bp quoted on Friday.
Meanwhile, the sovereign's benchmark 2025s were largely flat on a price basis at 93 bid after falling earlier to high 92s.
"The other shoe to drop (in Brazil) could be a downgrade and that may create an entry point," said Jorge Piedrahita, CEO of broker Torino Capital.
"At more than 500bp over some people may start looking at Petrobras 2024s. I am not concerned about a default scenario, but it could go (wider)."
For borrowers elsewhere in the region with market access, dollar debt looks increasingly unattractive as domestic currencies continue to sink against the greenback.
The Colombian peso, for instance, has dipped another 6.50% since earlier this month and was trading at around 2,860 against the dollar - some 17.70% weaker than where it was in early May. The Mexican pesos has also fallen to 16.27, or some 4.6% lower since mid July.
Sagicor Financial Corporation, an insurance and financial services provider with operations in the Caribbean and the US, hired JP Morgan and Scotiabank to arrange fixed-income meetings in the US and Europe ahead of a potential US$-denominated 144A/Reg S bond issue.
The meetings will take place in London on July 27, Boston on July 28, Los Angeles on July 29 and New York on July 30. Expected corporate ratings are BB-/B from S&P/Fitch.
Whisper of mid 6% are being heard on a US$750m 7NC3 from Sable International Finance Limited (Cable & Wireless) as it kicks off roadshows via BNP Paribas, JP Morgan, RBC and Scotiabank. Expected ratings are Ba3/B.
Brazilian conglomerate Cosan Overseas has wrapped up roadshows week after marketing a possible 144A/Reg S bond offering.
Bank of America Merrill Lynch, Bradesco, Itau BBA, Morgan Stanley and Santander organized the meetings. Expected ratings are Ba2/BB/BB+ by Moody's, S&P and Fitch.
Brazilian refractory company Magnesita has announced plans to buy back as much as all of its outstanding 7.875% senior notes due 2020 and to modify their terms and remove all restricting covenants.
America Movil (A2/A-/A) and Telesites (expected NR/BBB-/BBB-) wrapped up investor meetings via Citigroup, Inbursa, BBVA and Santander. The meetings were intended to discuss the new Operadora de Sites Mexicanos business and gauge interest for 144A/Reg S deals in Mexican pesos and/or USD. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)