Junk Jumps, Dives

Jul 1, 2011

LatAm corporates, and specifically high-yield issuance, continued to be the dominant theme in May and June after initial optimism about single B borrowers’ ability to tap DCM quickly faded in the wake of several postponed transactions.

In May, the market welcomed junk names with open arms. Brazilian oil and gas company OGX raised $2.56 billion, marking the first company controlled by magnate Eike Batista to try its luck in the international bond markets. While leads were forced to widen pricing by 100 basis points, the deal was hailed as a victory for single B issuers.

After setting a $2.0 billion size and whispering a 7.5% yield, leads were forced to revise to 8.5% after struggling to build a book among an investor base wary about an E&P operation that had yet to produce and was unlikely to see cash flow until 2014....

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