Market uncertainty takes toll in LatAm

Tue Oct 1, 2013 2:03pm EDT

NEW YORK, Oct 1 (IFR) - Market uncertainty is starting to claim its first victims in Latin America, as investor pushback forces sub-investment grade credits to adjust pricing terms or postpone deals altogether.

Mexican consumer finance company Credito Real is heard postponing its USD300m 5NC3, citing market conditions.

This comes after the issuer finished roadshows last week and emerged with price thoughts of high 7s. It is thought that the issuer plans to re-engage investors once market conditions improve, said a source watching the trade. The deal was being led by Bank of America Merrill Lynch and Barclays.

The company was last in the market in April 2010 when it issued a five-year 144A/RegS bond through Bank of America Merrill Lynch. On that occasion, it was rated BB- and demand reached about USD260m, with some 53 accounts participating.

The paper was distributed in the US (50%), Europe (20%), Latin America (20%) and Asia (10%). Buyers included money and asset managers (35%), private banking accounts (30%), banks (10%-15%) and hedge funds (25%).

In the end the deal priced at par to yield 10.25%, in line with guidance of 10.25%, providing a premium to senior guaranteed notes from Mexican microfinance lender Financiera Independencia (Findep).

The financial company, which focuses mostly on payroll loans, is rated BB (stable) by S&P. Last year, it went public with a MXN2.556bn IPO that was priced at MXN22 per share, the bottom of the MX22.00-MXN26.00.

Meanwhile, Mexican Marine oil services company Oceanografia has returned to print a US$160m five-year bond at par to yield 12%, but only after readjusting pricing terms and cutting the size in half.

Just last week the borrower postponed the transaction after failing to garner sufficient demand despite downsizing it to USD280m from USD300m and offering a higher 12% coupon.

The amortizing structure was also changed to take place in quarterly installments of USD8.5m beginning in 12 months after the settlement date. Before it involved USD8.4m payments starting 24 months after the settlement date.

The bond was originally secured by a first lien mortgage on two subsea vessels - OSA Goliath and Caballo Marango - the same names given to the two joint issuers, which are wholly owned subsidiaries of Oceanografia. The final structure only had the OSX Goliath backing the bond.

Through this issue, Oceanografia had hoped to gain control over the vessels at a lower overall cost than the current leasing agreement. The OSA Goliath and the Caballo Marango had been valued at USD245m and USD176m, respectively.

The vessels are expected to work for Mexico's state-owned oil company Pemex, with revenues generated from contracts going directly to a blocked account. Oceanografia has been in the international bond market before. In 2008, the Mexican offshore marine engineering services company priced a USD335m seven-year non-call four at 98.814 with an 11.25% coupon to yield 11.50%, or 791bp over US Treasuries.

According to an investor presentation, those bonds had been trading earlier this month at an indicative price of 85.25. Those bonds were callable at 105.625 in 2012, at 102.813 in 2013 and at par in 2015 and thereafter.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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