Barbados, Mexico swap debt as markets rally
Latin American borrowers are seizing a debt market rally to launch bond exchange offers
Mexico is taking advantage of a global bond market rally,
joining a wave of Latin American borrowers to exchange debt in
liability management exercises.
The sovereign sold a 10-year bond on Monday which yields
just over 4%. It is
using the proceeds of the $3.9 billion sale to buy back four
bonds with shorter tenors on which it pays higher
The move seizes on a respite in bond markets as investors
and borrowers respond to the US Federal Reserve's decision to
continue its $85 billion monthly quantitative easing asset
Yields on the benchmark 10-year US Treasury have fallen from
a recent high of 2.98% on September 5. They tightened to 2.69%
on September 18, when Ben Bernanke announced that the Federal
Open Markets Committee (FOMC) had decided not to taper QE.
The 10-year US Treasury closed at 2.72% on Monday (see
|| Source: US Treasury
Barbados also announced a debt buyback on Monday. The
Caribbean sovereign will buy back its 2021 and 2022 bonds below
par. It plans to sell a 12-year bond to fund the cash tender
will begin investor meetings in London on Wednesday.
A new international dollar bond would be Barbados' first
since it sold the 2022 three years ago.
It follows a series of liability management exercises by
Latin American corporate borrowers.
McDonald's franchisee Arcos Dorados opened a tender offer
earlier in the month. It is offering bondholders cash or a new
10-year bond in exchange for a 2019 note, which it is
repurchasing above par. The Ba2/BBB minus rated borrower was in
the market on Tuesday to sell the new bond.
Brazilian borrowers Embraer and Marfrig are also out with
liability management exercises. Both secured participation from
holders of just over half the bonds outstanding by the early
Embraer's offer to swap holders of 2017 and 2020 bonds for
cash or a new 2023 bond closes Wednesday.
Marfrig's offer closes Friday.
It is buying back a 2016 bond, funding the cash tender
offer with proceeds from the sale of a 2021 non-call four year
bond. The take-up rate means it can get rid of covenants on the
bond being bought back. LF