LatAm credit puts in mixed performance as borrowers prep deals
By Paul Kilby
NEW YORK, April 13 (IFR) - LatAm bond markets were putting in a mixed performance Monday but bankers were looking ahead, betting on a pick-up in primary activity later this week in what remains an attractive backdrop for borrowers.
"The market is in great shape in terms of overall risk sentiment," said a syndicate official. "From a technical standpoint the market remains under supplied on the corporate side."
This comes as the asset class continues to benefit from inflows as investors seek value in an asset class that still looks comparatively cheap.
"EM continues to benefit from cheap valuations with index spreads tightening 14-21bp this past week and narrowing the gap to other risky assets," Siobhan Morden, head of Latin America strategy at Jefferies this morning.
Still, Brazilian assets were looking a touch softer Monday morning after enjoying decent run-up over the past week despite Fitch's decision Thursday to put the sovereign's BBB rating on negative. The country's 2025s were being quoted at around 99.65, down about 50 cents on the day.
Vale was also under some pressure this morning as its 2022s slipped to 96.98 after S&P warned that it could soon downgrade the Brazilian credit along with other miners as it adjusts its estimates on iron ore prices lower.
Beef producer JBS, on the other hand, was enjoying a jump in debt prices with its 2024s climbing to 104.25-105.00 after Moody's upgraded its notes to Ba2. The rating agency cites how a strong performance in key business units have improved credit metrics, with adjusted leverage dropping to 3.8 times at the end of last year from the 5.0 times seen in 2013.
"Assuming no major acquisitions in the near-term, as has been publicly pledged by the company, and stronger cash generation, we estimate that normalized gross leverage could reach 3.5x in 2015," it said. Continuación...