Latin America DCM issuance conspicuous by its absence
This year, many Latin American debt issuers eschewed the traditional practice of issuing in January, believing the expensive market would move in their favour. That reading now looks like a bad one.
First it was fear of the Fed, then it was volatility from the war in Ukraine that kept Latin America’s issuers on the sidelines in 2022. But as March progressed, markets began rallying following the increase in US rates and as volatility from the outbreak of war began to subside. The commodity-heavy and geographically distant region is a potential haven for emerging market (EM) investors, but bankers were still waiting for a corporate or sovereign brave enough to reopen the market.
There were hopes that Klabin, a Brazilian pulp and paper manufacturer, would include issuance of new bonds in its liability management exercise that it wrapped up on March 21. But its offer to repurchase $173 million of 5.25% 2024s at 105.275 cents on the dollar and $490.5 million of 4.875% 2027s at 103.4 cents on the dollar will be funded through existing cash and cash flow.
And the longer the surprisingly low level of international debt capital markets activity from Latin American issuers persists, the more awkward the conversations between some CFOs and their bankers will become.