NASSAU, April 7 (IFR) - Argentina was foremost on bankers’ minds at the annual IDB meetings in the Bahamas on Thursday after the South American country announced roadshows for a much-awaited jumbo bond sale.
Borrowers across the region have been timing new issues around Argentina’s first bond offering in 15 years, potentially the largest such transaction seen out of emerging markets.
Issuers have either pulled the trigger well ahead of the mega trade or they are simply waiting to assess the impact on the market of a deal that is expected to be US$12bn or more in size.
“We had a sense a transaction that large would have an impact,” Paraguay’s Finance Minister Santiago Pena Palacios told IFR on the sidelines of the conference. “We were monitoring the Congressional progress in Argentina.”
Paraguay was the last Latin American country to issue a sovereign bond this year, when it raised US$600m in March.
The IDB kicks off its annual meeting amid an improving but still cautious outlook for Latin America after fears of a US recession and lower oil prices sparked a steep sell-off earlier the year.
Bankers and borrowers were feeling slightly more optimistic following some stability in commodity prices and the assumption that the Federal Reserve would slow the pace of rate hikes after Janet Yellen’s dovish speech in late March.
“It is a welcome relief that we have seen this recovery in foreign exchange and commodity prices,” said Peru’s Finance Minister Alonso Segura, whose country last tapped the international capital markets in February with a euro bond.
The Andean nation is well prepared for any further volatility ahead after recently signing US$2.5bn of contingent credit lines with the World Bank this month.
By covering most of its financing needs for 2017, it has also left a clean slate for whichever government takes power following elections this year.
Certain issuers however are still suffering headaches from past borrowing sprees, not least the Baha Mar, the mega hotel complex where the IDB is being held this year.
The bankruptcy of the colossal US$3.5bn resort was mentioned by Standard & Poor’s last year as one of the reasons behind its decision to downgrade the Bahamas to BBB- from BBB with a negative outlook.
The agency said in August that it saw a greater than one-in-three chance that it would further lower the country’s ratings to junk over the following 24 months.
For now at least the abandoned complex is enjoying a burst of activity as bankers, borrowers and issuers gather to cut deals and assess the prospects for the region.
Peru aims to complete discussions with Euroclear by the end of the second quarter to ease foreign investor access to the local bond market, a debt official told IFR on Thursday.
The move would likely increase the share of local bonds held by foreigners from around 33% currently, though the government is committed to taking a gradual approach to opening up its US$14bn-equivalent Soberanos market.
“We are getting more interest in Soberanos from foreign investors,” Carlos Blanco, Peru’s director general for public credit, told IFR on the sidelines of the annual IDB meeting.
“Our intention would be to have that ready before the new administration comes in, so that they have all the available elements and tools to make this market more liquid,” he said.
Honduras-based Cabei raised US$185m from Taiwanese investors on Thursday with its first-ever dollar bond in the Formosa market, the development bank’s head of capital markets told IFR.
While the bank has tapped Taiwan accounts to issue in yuan in recent years, a dollar deal made more sense now amid worries about a currency devaluation by China, Ricardo Rico said in an interview.
By issuing a Formosa bond in US dollars, the bank is following in the footsteps of boldface US credits such as AT&T and Morgan Stanley.
“It is a huge market,” said Rico. “You don’t see Latin American issuers going to the US-dollar Formosa market.”
Cabei, rated A1/A/A, was also able to extend its debt maturities beyond 10 years as insurance companies are the principal buyers of such deals.
The bank printed a US$25m 20-year non-call four bond at par to yield 4.40% and a US$25m 30-year non-call five at par to yield 4.55%.
It also sold a US$135m five-year floater that came at three-month Libor plus 50bp. HSBC was sole lead on the transaction.
“The cost of funding is well below what we could obtain from a large 144A/Reg S US dollar (deal),” Rico said. (Reporting by Paul Kilby; Editing by Davide Scigliuzzo)