Latin America's $7 Billion Bond Pipeline Tests Capacity for Risk

(Bloomberg) -- Borrowers from Chile to Mexico are hoping a thaw which began last week in emerging-market bond sales will last long enough for them to raise as much as $7 billion before year-end.

Petroleos Mexicanos, the world’s most indebted oil company, led the way when it sold $2 billion of debt last week, signaling a reopening of the window for international sales from Latin America. It’s been a challenging year for corporate and sovereign issuers in the region as economic and political turmoil in the largest markets as well as higher rates in the U.S. put a damper on deals.

“The Latin American new-issue window opened in a big way when Pemex came to the market,” said Roger Horn, a senior emerging markets strategist at SMBC Nikko Securities America in New York. “Bankers will be assessing investor interest over the next couple of weeks.”

The Pemex sale was followed by deals from JBS SA, the Brazilian meat producer that’s emerging from a bribery scandal, and Colombia’s Transportadora de Gas Internacional SA, which sold $750 million of debt. The government of Panama also offered sovereign notes.

Here’s where some of the new debt sales might come from, according to an informal survey of bankers with close ties to the region’s debt markets:

• Chile’s Empresa Electrica Cochrane may resume its postponed $725 million bond deal. The company decided last week not to proceed, citing market conditions.
• In Brazil, the struggling infrastructure operator Investimentos e Participacoes em Infraestrutura SA is trying to push through a sale of as much as $650 million of debt by offering a yield of about 9 percent. Invepar’s roadshow ends Wednesday and a deal could be finalized as soon as Thursday.
• Petroleo Brasileiro SA, or Petrobras as the Brazilian state-controlled oil company is known, might also tap the international market for liability management in the coming months.
• The government of Peru has authorization to sell as much as $3.5 billion of bonds either in soles or hard currencies. The sovereign issuer, which could price a dollar-denominated deal at yields in the low 4-percent area, has finished its roadshow.
• Argentine issuers such as YPF SA’s electricity unit, oil producer Pan American Energy LLC or the City of Buenos Aires could try to make a move after the country’s bailout by the International Monetary Fund earlier in the year.

One factor that may make it easier for these companies to issue debt is that they’re mostly looking to reduce the cost of their liabilities, as opposed to raising funds for investment or acquisitions. And that also means that if they can’t find attractive financing now, they can wait for better conditions.

--With assistance from Cristiane Lucchesi, Felipe Marques, Misyrlena Egkolfopoulou and Ye Xie.

To contact the reporter on this story: Pablo Gonzalez in Buenos Aires at pgonzalez49@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Brendan Walsh

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