Asian Fever & Chills
Asian individual investors are a rich new financing source for Latin American credits as wealth continues to build in the East.
When Brazilian electric
power utility Companhia Força e Luz Cataguazes
Leopoldina tried and failed to sell a perpetual bond directed
at Asian retail investors a few months back, it appeared as if
Latin American issuers may have overstayed their welcome with
this relatively new and promising investor base. "The market
just went away. The window closed," says Augusto Urmeneta, a
director in Merrill Lynch's capital markets group who worked on
the deal. With indications of higher interest rates in the US
and other developed economies, investors the world over were
turning their backs on emerging market instruments to instead
buy safer bets, like US Treasuries.
Yet by adjusting the offer to a 7-year, $250 million bond
aimed at institutional investors with a 10.5% coupon, the
Cataguazes deal was able to price in mid-July at 565 basis
points over US Treasuries. About a third of the demand for
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