Borrowers from Latin America have sold $1.57 billion worth
of debt in Swiss francs this year, a record total reached before the year is even
half finished, according to Dealogic. The run of issuance is providing solace
to high-grade borrowers who have found themselves locked out of the dollar
market as investors flee emerging market assets.
de Chile was the most recent borrower to hit the Swiss market, selling a
225 million Swiss franc ($243 million) on June 11. That followed the 125
million Swiss franc bond sold by Banco Santander Brasil on June 3 in a
diversification bid that also pulled in attractive pricing – the bank priced
through its own Swiss curve.
“Equities were a bit negative, but we have seen a strong
Swiss franc market over the past weeks and decided to go ahead with a
transaction,” Alvaro Carbajosa, Santander Brasil’s head of international
funding, said at the time of his bank’s deal.
Well-rated Latin borrowers are finding a ready investor base
for transactions in Swiss francs. Volatility in US interest rates has pushed
investors to offload dollar denominated bonds, particularly those from emerging
Investors yanked $1.52 billion from emerging market debt
funds and $3.99 billion from EM equity funds in the week to June 5, according
Outflows from EM hard currency funds were the highest since the second quarter
of 2007, according to EPFR. Cash left local currency funds for the first time
since the third quarter of 2012.
“The Swiss franc market tends to be less volatile than
others,” says Dominique Kunz, managing director and head of Swiss DCM at Credit
Suisse, which managed the Santander Brasil sale. “And it plays in our favor
most times, though sometimes not.”
‘Nothing beats Swiss’
Móvil in May clinched the lowest yet coupon for a LatAm issuer in the Swiss
market, and likely the tightest-ever spread, in its fourth Swiss sale. The
telecom reopened its 1.125%-coupon bond to yield 0.917%, or mid-swaps plus 47 basis
“If you want to issue five-year paper [for us] nothing would
beat Switzerland,” América Móvil CFO Carlos García Moreno says. He adds that
five to six years is most efficient spot on the curve, with no value beyond
that. This is due to the large presence of retail investors.
Other issuers this year have included Santander Chile, Corporación
Andina de Fomento (CAF) and the Central American Bank for Economic Integration
out for in-depth discussion of the opportunities for Latin borrowers in the
Swiss franc market in the July edition of LatinFinance magazine – online at www.latinfinance.com from June 28.