TRLPC: LatAm loans keep steady; bankers expect year to end flat
NEW YORK Aug 28 (Reuters) - Latin American deals have made their way to the market through the US and Europe's slower summer months with borrowers getting offers from banks looking to lend. While activity has been steady, bankers forecast year-end volumes will be good though not overwhelming as Brazil, Latin America's largest economy, is slated for a slower second half.
Deals have been tightly priced in recent months, especially for top names. Carlos Slim's America Movil allocated a $2.5 billion, five-year revolving credit facility in August, bringing 21 banks to the table with pricing of 45bp over Libor.
"We have banks in all the markets being very aggressive. It's good for the market and good for borrowers," said a banker.
Syndicated loan volume, including deals in the pipeline, has reached $17 billion in 2014, already ahead of last year's $14 billion through the third quarter, according to Thomson Reuters LPC. Total loan volume in 2013 was $22.9 billion, down 16 percent from 2012, and bankers expect this year to close largely on par with last.
"That eagerness and demand remain, which is ultimately what's been putting pressure on pricing," said Felipe Macia, head of loan syndications Americas at Standard Chartered, adding that fee compression is another piece of the puzzle. "There's a lack of supply and a lot of demand."
Tenors have also been getting longer. Pemex is in the market with a MXN30 billion ($2.3 billion), 10-year amortizing loan paying 95bp over the TIIE. And banks are selectively able to accept tenors of the like. The third quarter is seeing a bulk of funds being used for refinancing, which is expected to continue into the fourth quarter. Some $5.165 billion so far this quarter is slated for corporate purposes, against $1.36 billion for project finance and $645 million for acquisitions.
Less volume is coming from Brazil. It had a robust first half - though less so than some had expected - as borrowers rushed to get deals done ahead of the World Cup and upcoming elections. Volume in Brazil reached $7.38 billion in the first half, where it saw $8.36 billion in 2013. But it appears to be slowing, with less than $1 billion in deals reported for the third quarter so far, according to Thomson Reuters LPC. "What we hope for will be a flurry, another uptick right after the elections," said Macia.
If borrowers perceive financing costs will likely rise later on, they could jump at the opportunity. Additional volume could also come from Mexican companies looking for acquisitions, not only in Mexico but in other parts of Latin America, the US and Europe.
"First semester was good, and I think things will continue as positive," said a second banker about ongoing potential in the country, citing activity in industrials, consumer products and retail.
Much of the LatAm loan volume has, in fact, come from Mexico - almost $5 billion in the third quarter alone, including deals in progress, versus $1.34 billion in the first half.
Meanwhile, energy reforms in Mexico have laid the groundwork for more project finance-related activity, but the majority of it may still be a bit down the road, said a third banker.
"You should start seeing things in 2015, but this was the year in which the reforms were passed," said the banker. "But the coordinating legislation had to be done."
Peru could see financing closing late this year or early next for infrastructure projects it has in the works, said a fourth banker. One of the most advanced, for Metro de Lima's Line 2, could close a revolving credit facility with a project finance structure as soon as the end of this year.
"Other than the Metro de Lima I think most of the projects are going to be next year," said the banker, who is following the financing. (Editing By Jon Methven)
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