NEW YORK, Sept 14 (IFR) - Argentina’s gas-rich province of Neuquen joined a growing Latin American pipeline Monday as markets braced for this week’s FOMC meeting, which could kick off long-expected US rates hikes.
The province is expected to raise US$350m through a 12-year bond with a four-year grace period, according to Fitch, which has rated the issue CCC.
Deutsche Bank and JP Morgan are organizing meetings with fixed-income investors from September 16-21, stopping in London, Boston, New York and a fourth location still to be determined.
The notes, which will be sold to international investors in 144A/Reg S format, will be secured by gas royalties.
Omar Gutierrez, Neuquen’s elected governor, and Marcos Koopmann, the president of Banco Provincia del Neuquen, will attend the meetings.
Otherwise it was a relatively quiet day in the LatAm markets, though debt issued by Brazilian oil company Petrobras continues to widen after a second downgrade to junk last week.
The 10 to 30-year portion of the company’s curve was inverting, with the 2024s being quoted at around 800bp, according to one investor.
“There will be pent-up supply in Brazilian paper as people throw in the towel, given S&P’s rating downgrade to junk (for both the sovereign and Petrobras) last week,” said a New York-based trader.
Markets are trying to determine whether the rest of the region will benefit from a flight to safety out of Brazil or be tainted by the same brush, the trader said.
A decision by the Fed on Thursday to start hiking rates in the US could spur a relief rally, while another delay will only add to the broader uncertainty in emerging markets.
“I hope they do raise rates, but I don’t think they will given the recent Chinese volatility,” the trader said.
Meanwhile Peru is well prepared for any potential volatility from a rate hike, Finance Minister Alonso Segura said at an event in New York organized by the Lima Stock Exchange.
“We are prepared as a country ... We have a lot of fiscal space,” Segura said. “(Gross) public debt to GDP is around 20%. How many countries can claim that?”
The sovereign (A3/BBB+/BBB+) has already funded its 2015 budget and has pre-financed a portion of its 2016 needs through a US$1.25bn sale of a new 2027 bond in August.
As a commodity exporter, the country has watched its bonds undergo price swings as fears deepen over the strength of economic growth in China.
The 2027s were trading on Monday at around 99.50, or a spread of 200bp over - wide to their 195bp pricing level.
The country’s central bank surprised markets last week with a 25bp rate hike - its first since 2011 - on the back of improved economic growth as it looks to contain inflation brought on by a weaker currency.
Segura said that the country will become a more frequent issuer in the international capital markets going forward.
Panama’s Canal Authority (ACP) will kick off investor meetings next week through Bank of America Merrill Lynch as it looks to market a US dollar 144A/Reg S bond.
ACP, the entity in charge of the operation and expansion of the Panama Canal, will be in Los Angeles on September 15, Chicago on September 16, New York on September 17 and Boston on September 18. Roadshows end on September 21 in London. The issuer is rated A2/A-/A.
Mexican real-estate investment trust Fibra Uno has wrapped up meetings with fixed-income investors through Bank of America, Credit Suisse, HSBC and Santander.
Terrafina, another Mexican REIT, has also finished meeting accounts as it markets a potential US$400m-$500m bond offering.
The borrower has mandated Barclays and Citigroup as lead managers, with Itau coming in as co-manager. Expected ratings are Baa3/BBB-.
Both could tap the market this week. (Reporting by Paul Kilby; Editing by Marc Carnegie)