Euro bond investors' complacency around Brazil shaken
* Spanish firm's bond collapse highlights Brazil risk
* Hedge funds look for short opportunities
* Petrobras exposure in the spotlight
By Robert Smith
LONDON, Sept 17 (IFR) - Brazil's deteriorating economy is not an obvious threat to European corporate debt investors, but the crash in Abengoa's bonds has provided a stark reminder of the risks emerging markets exposure can pose.
When the Spanish company shocked bondholders by slashing free cashflow guidance in half at the end of July, it primarily blamed the "one-off impact from projects in Brazil".
The clean energy firm denied it would need additional capital to plug the hole, but just days later announced plans to raise 650m. It is yet to announce any underwriters for the cash call and most of its bonds are still trading at less than half their face value.
Last week it was the turn of US dollar bond investors to reassess their exposure to Brazil after Standard & Poor's stripped the Latin American country of its investment grade rating, prompting bonds, particularly from the banks such as Banco do Brasil and Itau, to tank.