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Market Troubles Creep in on Local Debt Deals 0

Jun 21, 2013

Brazilian and Mexican domestic market bond deals had showed a bit of immunity to the rough conditions that have affected the international bond markets - that is, deals were getting done at all.

As the pessimism continues, however, it is getting tougher. Brazil's Rodovias do Tietê is heard pricing a 1.07 billion reais ($473 million) transaction at the wide end of a price range. Full details remain to be released, but the deal was also helped by a guarantee from the lead banks.

Comgas delayed a debenture sale earlier this month, and today BNDESPar appears to be opting to wait for a 2.5 billion reais sale that would be Brazil's largest deal this year. Others in the pipeline, such as Oi and Raizen, still have a bit of time to wait and see how things develop.

Mexico  has a history of completing domestic deals in previous times of international sluggishness, and Bancomer priced the first bank RMBS bond since 2009 this week. However, it appears that floating rate transactions may be the only option going forward, with state oil producer Pemex and restaurant operator Alsea clinching deals or 2.5 billion pesos each this week. Pemex  opted to wait on a much larger fixed-rate global depository note tranche. Genomma Labs also is being cautious with a fixed-rate note it had planned for this week.

"Issuers that are looking at fixed and floating will probably be looking at floating," says a Mexico City debt investor. "This is where the appetite is."

A further test will be the Comisión Federal de Electricidad, planning a 15 billion peso sale scheduled for Tuesday that is meant to include both fixed and floating-rate portions.

In Chile, which has been a much less active market this year, issuers are hopeful that a 5 million UF ($226m) deal from Banco Estado is able to get done Tuesday.

Once the Rodovias do Tietê  deal finalizes, Brazilian issuers will have raised 7.92 billion reais this year using the rule 400 widely-distributed format, according to CVM data. This suggested a roughly equal pace to 2012, when they did 7.0 billion reais during the corresponding period. In Mexico the 99.66 billion pesos raised in 2013 through this week in the local markets was up from 81.68 billion pesos during the corresponding period in 2012.


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