2 de septiembre de 2015 / 20:30 / en 2 años

LATAM WRAP-Terrafina preps bond sale in unsteady market

NEW YORK, Sept 2 (IFR) - Mexican REIT Terrafina may be the first Latin American borrower out of the gate in September as it prepares to raise US$400m-US$500m through a debut in the US dollar bond market.

Terrafina’s deal, rated Baa3/BBB- by Moody’s and Fitch, is thought to be one of two Mexican REITs looking to kick off bond roadshows in coming weeks.

REITs are seen as strong candidates to break the ice because not only are they comfortably disconnected from troubles in the commodity space, but they also have US dollar leases that act as a natural hedge for FX exposure that comes with dollar issuance.

That ability to reduce FX risks is important in a year that has seen EM currencies plummet against the greenback. The Mexican peso, for example, has declined about 30% since September 2014.

Terrafina, which has a portfolio of high-quality industrial assets, has traditionally funded itself with secured debt but it is now seeking to transition itself into an unsecured borrower, according to Moody‘s.

It recently closed a US$375m three-year unsecured bank facility used to refinance secured debt and proceeds from the bond deal will also help retire debt.

Through these two transactions, secured debt as a percentage of gross assets is expected to drop to 13.7% from 37%, according to the rating agency.

Terrafina’s net leverage ratio stood at 3.4 times in June, but that is expected to jump to 5.5x over the next few years as it acquires more assets, said Fitch.

“We have a decent pipeline that has been building, but it is not as if we have much on the near-term calendar,” said a syndicate official. “I am sure we will see some supply once US high-grade picks up, depending on US economic data and the FOMC.”

Meanwhile, Brazilian credits continued to widen despite the better tone in broader markets. The 2024s issued by oil company Petrobras were about 10bp wider at 610bp-635bp.

Bonds backed by drillship assets took a particularly hard hit on Wednesday following news of Petrobras’ decision to terminate a contract with Vantage Drillship.

While that drillship does not act as collateral on any bonds, it brought attention to the asset class.

“This is the first time Petrobras unilaterally claimed breach of contract,” said a trader, who noted that Odebrecht’s drillship backed bonds due 2022s were trading at 50.25.

Vantage is contesting the breach of contract allegations and has filed for arbitration to challenge Petrobras’s move. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)

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