Bond issuers rush to markets ahead of FOMC
LatAm credits raised $5.3 billion last week, ahead of uncertainty about the Fed's message
LatAm saw $2.3 billion issued through five DCM transactions
on Friday, capping off a $5.3 billion week ahead of this week’s FOMC meetings.
The outcome of the US policy meeting is expected to be one of the key
signposts for the availability of cross-border funds in September and October.
The US jobs report was the first key indicator in September,
and it appeared to give issuers the green light. This week, borrowers will get
another indication of the expectations for a US recovery and perhaps indications on the timing and pace of the tapering of quantitative
The market is expecting a $5 billion to $10 billion reduction
in monthly asset purchases beginning in September, according to Bulltick. The
shop notes, however, that its own expectation is for no reduction this month,
with the Fed beginning easing in December.
“We expect inflation to remain comparatively irrelevant, and
after August’s disappointing non-farm payrolls figure and downward revisions to
previous numbers, we have held our out-of-consensus call for no taper to launch
next week,” Bulltick says.
Plenty of issuers remain in the pipeline, but those wanting
to make sure they raised funds in September took advantage of good conditions
Mexico’s Offshore Drilling Holding (ODH) raised
a $950 miller 2020 NC4 bond, getting $1.5 billion in demand. The deal is
expected to be the first of many from Mexico’s oil supply chain, as the oil
sector becomes more active on the back of an energy reform package now working its
way through congress.
Others took advantage of demand for Mexican credit, particularly
in the high yield space. Office Depot de Mexico (ODM) printed
a $350 million 2020 NC4 bond, in its international market debut. The
retailer’s parent, Grupo Gigante, raised the funds to repay a bridge loan used to
buy out the remaining 50% in its subsidiary earlier this year. It followed TV
$500 million 10-year bonds.
In Brazil, Marfrig raised
$400 million to fund a tender offer, replacing 2016 bonds with new 2021s. Fellow
meatpacker JBS did the same at its US subsidiary, reopening
its 2021 for $500 million as it replaces a 2014.
Panama’s Global Bank reopened
its 2017 bond for $100 million. The bond became LatAm’s first-ever covered
bond when it was originally placed last year.
Friday’s deals followed a $2.5
billion effort from Colombia’s Ecopetrol, its first deal since a 2009 debut
and largest ever. The state-owned oil producer sold five and 10-year bonds, and
added a 30-year tranche on reverse inquiry. LF