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Capital Markets

Investors pour into hot new Latam issue market

Primary issuance in Latin American DCM is enjoying unprecedented liquidity, supply and deal volumes. The region is leading the 2012 emerging market fixed-income resurgence, and the battle for power between issuers and investors is developing into a fascinating contest.

With all due respect, but if Digicel can print a seven-year issue then..." Jim Craige, partner at Stone Harbor Investment Partners in New York, which manages emerging market fixed-income funds, pauses momentarily. He continues: "Let’s just say that if I were an issuer I’d be out in the market all day long. I’d turn myself out to 2016 right now if I could. You could sell anything in this market."

Craige was speaking two days after the Caribbean telecom’s $250 million transaction on February 7 that priced at par to yield 7% (treasuries plus 503 basis points). On February 9 Turkey also pointed to heat in emerging markets bonds when it re-tapped its 2022s, selling without a new-issue concession. In the first six weeks of 2012 there was unprecedented deal flow and investor liquidity: $30 billion of cross-border debt was issued by Latin American credits, more than in the whole of 2008. Bankers were reporting a sellers’ market and a pipeline that was far from exhausted.

But later in the day on February 9, Brazilian sugar and ethanol company Grupo Farias and Dominican port company Caucedo abandoned deals in the dollar bond market. In the week to follow, Gol Linhas Areas failed to print a perpetual and the City of Buenos Aires pulled a dollar-denominated transaction.

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