February 2, 2017 / 9:51 PM / 2 years ago

LatAm primary markets enjoy surge of activity

NEW YORK, Feb 2 (IFR) - Latin American primary markets enjoyed another burst of activity on Thursday, with an eclectic group of borrowers approaching investors with both euro and dollar debt.

Food company Sigma Alimentos got the ball rolling overnight with a 600m seven-year bond, marking the first Mexican corporate to tap international investors this year.

Sigma, which now owns 100% of Spain’s Campofrio, was seen as a good candidate to break the ice among investors concerned about US President Donald Trump’s plans to revamp the North American Free Trade Agreement.

“It is a good name to put in the middle of all the noise around Mexico,” said a banker “It has Mexican risk but also Spanish risk.”

Leads were able to squeeze pricing from IPTs of mid-swaps plus 250bp-262.5bp to guidance of plus 237.5bp-250bp before landing the deal at plus 225bp after amassing a 2.75bn book.

“There is a natural need for them to raise euros,” said a second banker.

“It is easier for them to do that then raise dollars and swap to euros, especially given the concerns of having derivatives on your balance sheet that can take up some of your cash flow.”

In the dollar market, Brazil’s Rumo was also able to tighten pricing by 37.5bp from start to finish before printing a US$750m seven-year non-call four bond at a yield of 7.375%, inside IPTs of high 7%.

Demand was heard reaching around US$3bn among investors who liked the yield and conglomerate Cosan’s ownership stake.

Since its merger with America Latin Logisica (ALL), Rumo has become Brazil’s largest railroad operator and is looking to revamp its assets through an aggressive investment plan, according to S&P.

“It is a relatively attractive yield compared to many alternatives in the market, and the company has a lot of opportunities to gain operational efficiencies,” said Darin Batchman, a portfolio manager at Stone Harbor Investments.

Elsewhere, Argentine bank Banco Supervielle, approached foreign accounts with a peso-denominated 144A/Reg S 3.5-year bond that was launched at the country’s deposit rate Badlar plus 450bp.

The deal comes on the back of a rally in government local currency debt after Argentina qualified for inclusion on JP Morgan’s local currency GBI-EM index.

“The sovereign’s local curve has rallied significantly on the announcement they would be part of the index, and on the margin that helps (Supervielle),” the banker said.

Supervielle’s trade is the third Argentine local currency deal to hit the market over the last six months or so, following a US$400m-equivalent three-year amortizer from Banco Hipotecario that priced at 250bp over Badlar in October.

State-controlled oil company YPF also issued a larger US$750m equivalent 2020 bond in June last year, coming at Badlar plus 400bp.

While banks naturally like floaters, a coupon floor was seen as essential for getting investors on board at a time when rates are expected to decline as the central banks starts to contain inflationary pressures.

As with the YPF trade, Supervielle’s trade comes with a coupon floor of 18%. “The key will be whether investors are happy with the floor,” the banker said.

Supervielle is the third Argentine issuer to come to market this week amid mixed results.

While airport operator AA2000 saw robust demand for its US$400m secured trade on Monday, the Province of Entre Rios generated a book of just US$800m for its US$350m eight-year bond on Wednesday, even with a yield of 9%.

This comes as the Province of Buenos Aires prepares roadshows for next week , and Stoneway Capital Corporation, an Argentina focused power generator, readies a US$500m 10-year deal. (Reporting By Paul Kilby; Editing by Shankar Ramakrishnan)

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