NEW YORK, Jan 25 (IFR) - The Latin American primary markets were enjoying another burst of activity on Wednesday as corporates led the way following a deluge of sovereign supply last week.
Brazilian aerospace company Embraer and the Central America Bottling Company are both expected to price on Wednesday, while utility AES Argentina is readying a deal for Thursday.
Airport concessionaire Aeropuertos Argentina 2000 has also kicked off roadshows, while food company Sigma will soon meet European investors ahead of what could be the first crossborder bond to come out of Mexico this year.
The rush of deals come amid a broader positive market tone after the Dow Jones Industrial Average hit 20,000 for the first time on Wednesday.
The Central American Bottling Company’s new US$500m 10-year non-call five bond is expected to receive a welcome reception among investors who like the sector.
“People like the cash flow generation of these credits,” said the first banker. “If you can buy a bottling company in the high 5%, that is not bad.”
The company, rated Ba2/BB/BB+, has already tightened guidance to 5.875%-6% from initial price thoughts of low 6%.
Should leads land the deal at the tight end of that range, the issuer will come at a spread of around 337.5bp over Treasuries, or less than 100bp back to the Guatemalan sovereign which has a 10-year trading at a G-spread of around 250bp.
At that level the bottler would also come well inside the 437.5bp-450bp fair value that the syndicate banker calculated for a 10-year from Guatemala’s Banco Industrial (BB/BB).
Embraer, meanwhile, has also tightened to guidance of 5.50% (+/-10bp) on a 10-year bond, compared to initial price thoughts of high 5% area.
With its existing 5.05% 2025s trading at a G-spread of 270bp, the syndicate banker estimated fair value on a new 10-year at Treasuries plus 287.5bp, or a yield of around 5.375%.
AES Argentina, meanwhile, is coming with the country’s third utility bond this month - a US$300m seven-year non-call five that is offering initial price thoughts at low to mid 8%.
At that level, pricing is coming somewhere between the larger utility Pampa Energia, whose new 10-year is trading at around 7.65%, and energy company Genneia whose shorter-dated five year is being quoted at 8.125%.
And the primary markets are expected to remain busy in the near term.
Sigma Alimentos will soon test appetite for Mexican credits with what could be that country’s first crossover deal of the year - a debut seven-year euro denominated bond.
The company starts investor meeting next week as US President Donald Trump moves forward with promises to renegotiate the North American Free Trade Agreement and build a wall on the Mexican border.
The company, which is part of Mexico’s Alfa conglomerate, is positioning itself as a multinational food company with operations in Europe, the US and Latin America.
“As far as Mexican corporates are concerned, I would consider Sigma as one of the more global names, but it is a Mexican corporate,” said the syndicate banker.
“It will be interesting to see how investors respond to it.”
There is some indigestion developing after Latin American sovereigns last week sold over US$12bn of bonds in what some bankers described as a record week for emerging market primaries.
But corporate borrowers are still pushing ahead with deals this week amid uncertainty about the impact of US President Trump’s policy actions and direction of rates in coming months.
“The tone is softer because of all the supply in the market (last week) and people are unsure of policy in the US and rate volatility is weighing a bit,” said a banker.
Colombian glass company Tecnoglass appeared to struggle on Monday when it printed a smaller than expected US$210m five non-call three bond at 8.5% - flat to initial price thoughts.
Even so, the bond has held up to trade at 99.00-99.50, according to MarketAxess, up from a reoffer price 98.798.
“Dollar prices are lower because of the move in Treasuries to 2.5% but in spread terms they have held up well,” said a syndicate banker. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)