Hybrid securities: Perpetual bonds will return with a bang
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CAPITAL MARKETS

Hybrid securities: Perpetual bonds will return with a bang

Flurry expected in Q4; Investors seek high-yielding structures

A flurry of Latin American perpetual bond issuance is expected in the fourth quarter, following a $500 million bond for Brazilian construction and engineering company Odebrecht. Bankers close to the deal are confident that Odebrecht could kick-start further issuance of up to $2 billion before the end of the fourth quarter. Predictions for 2011 and beyond are for a possible resurgence of perpetual bond issuance in which up to 100 Latin American corporates will take part.

"It was very quiet in 2008 and most of 2009 after some good volumes between 2005 and 2007, and then in October 2009 the $1.5 billion Banco do Brasil perpetual bond reinvigorated this space"

Chris Gilfond, Citi

Chris Gilfond, managing director and head of Latin America debt capital markets at Citi

 

The market for perpetual bonds – which typically have no fixed maturity but include a call option after five years – has been quiet in the past couple of years. A $1.75 billion deal for Petróleos Mexicanos (Pemex) in 2004 launched the Latin American market. A few strong years followed in 2005 (two bonds with a combined value of $3 billion), 2006 (10, $3.55 billion) and 2007 (10, $3.15

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