NEW YORK, Sept 23 (IFR) - LatAm credit continued to take its cue from events in Brazil, where dollar bonds were giving back earlier gains on Wednesday as the Real sunk further despite central bank intervention.
An initial bounce following the Brazilian government’s success in preventing further public expenditures soon turned south amid profit-taking and further selling, said traders.
A steep sell-off in Brazilian corporate bonds this week brought out buyers lured by the cheap prices, but investors are reluctant to hold long-term positions in a country whose economic outlook remains bleak.
“It is cheap, but investors don’t want to catch a falling knife,” said a New York-based trader.
The 2024s issued by state-controlled Petrobras were closing flat at around 71.50-72.00 after reaching 72.00-73.00 earlier.
Credit followed the lead of FX markets, where the Real tumbled to 4.16 against the dollar on Wednesday despite the central bank’s efforts to support the currency.
And while markets cheered news that Congress supported President Dilma Rousseff’s veto on higher public expenditures, firm fiscal measures will be required to keep sellers at bay.
“We need something else,” another trader told IFR. “We need approval of the fiscal actions that the government has been promising.”
Still, troubles in Brazil have proven positive for other Latin American countries, which are benefiting from the redeployment of capital out of the region’s largest economy.
“Everyone is looking at LatAm through the lens of Brazil,” said the first trader. “But I am starting to see capital put to work in Mexico and Colombia.”
This may be good news for a string of Mexican borrowers preparing to sell bonds in coming days, including white-goods manufacturer Controladora Mabe, state-owned Bancomext and two REITs, Terrafina and FibraUno.
In Colombia, bonds issued by state-owned utilities EEB and EPM were also catching a bid after fears about the companies’ mismatch between peso revenues and dollar debt.
EEB’s 2021s have bounced back to 104.125 after hitting a recent low of 103.75, but they were still off the 107 levels seen in mid August.
Sub debt issued by banks in Mexico and Colombia, which had been shorted as a hedge against exposure in Brazil, have also enjoyed a short squeeze in recent days as well.
Panama’s Canal Authority (ACP) is out with initial price thoughts of T+230bp area on a 20-year bond through Bank of America Merrill Lynch. Pricing is expected on Thursday.
ACP, the entity in charge of the operation and expansion of the Panama Canal, is rated A2/A-/A.
Mexico’s state-owned Bancomext has hired Bank of America Merrill Lynch and HSBC to arrange meetings with fixed-income investors ahead of a potential US dollar-denominated bond sale.
The meetings took place in New York and Santiago on Wednesday, and will continue in Boston and Los Angeles on Thursday, and London and Los Angeles on Friday. A 144A/Reg S transaction may follow.
Mexican white-goods manufacturer Controladora Mabe has started fixed-income investor meetings through Barclays, Bank of America Merrill Lynch, Citigroup and JP Morgan.
The issuer was in New York and Los Angeles today and will wrap up roadshows on Thursday. Ratings are BB+/BB+.
Aeris Holding Costa Rica, the operator of the Central American country’s main airport, is preparing an approximately US$127m bond sale, according to Moody‘s.
The agency, which assigned a provisional Ba2 rating to the deal, said proceeds would refinance loans extended by shareholders, the Overseas Private Investment Corporation and the IDB.
The Province of Neuquen, the third-largest oil-producing and largest gas-producing province in Argentina, ended roadshows on Monday through Deutsche Bank and JP Morgan.
A USD-denominated 144A/Reg S senior secured capital market transaction secured by gas royalties may follow.
Mexican real-estate investment trust Fibra Uno has completed 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 REITs could tap the market this week. (Reporting by Paul Kilby; Editing by Marc Carnegie)