June 1, 2006
The road to market is smoother with financial guarantees.A Guatemala bank bond issue wouldn't normally get a second glance from the capital markets. While Central America's largest economy is a big draw for ethnologists and coffee lovers, its lack of investment grade and rule of law have kept conservative investors away. But last September the country's largest bank, Banco Industrial, issued a two-tranche $200 million bond that was eaten up in New York. More impressive was that the $125 million first tranche was priced at just 32 basis points over LIBOR.
The bonds are backed by the cross-border currency flows stemming from Guatemala's $3 billion-a-year remittance market, of which
Credit enhancement used to be something that only municipalities in the US wanted to do. Now Latin American corporates are looking at it as well.