COVER STORY: High Yield Returns
Jan 1, 2010
LatAm high yield has rekindled much faster than anticipated. But as cash rich investors scramble for yield and diligence slips by the wayside, the specter of another bubble looms.
by Ben Miller
Single B credit, cov-lite loans, perpetual bonds, Argentine and Venezuelan exposure, 15% yields, debut borrowers raising twice their annual revenue via deals due in 2014. For some market veterans, the LatAm corporate credit market smells like pre-crisis 2007 all over again. For others, it is markedly different, more stable, and further indication that the sector is growing up.
A year on from the apex of the tempest, more than $25 billion in corporate dollar bonds was issued from the region in 2009. Investors, still with ample cash in need of allocation, are hungry for the growth opportunity widely advertised by emerging markets, especially versus an anemic developed world outlook.
The revival in credit started off orderly but raised eyebrows late last year. Governments paved the way to quasi-sovereigns, which sold bonds in February, with blue-chip corporates following in April. By late July, well known high-yield issuers...
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