John McIntire, Goldman Sachs
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John McIntire, Goldman Sachs

Different ways to skin a cat

Bonds with resettable coupons have been a central feature of the Latin American scene over the past year helping bring to market issuers unfairly penalized by blanket hostile conditions. This way, if things improve, interest payments will reduce. Equally investors feel secure in case the situation degenerates.

Complex in nature, banks structuring and selling these "spread floater transactions" have to convince sceptics both inside and outside the firm that the deal is do-able.

No-one understands this better than John McIntire, a managing director at Goldman Sachs and one of the market's heavyweights, who has been involved in some of the most sophisticated deals of this type. In two issues, for Petroleos Mexicanos in March and the Republic of Colombia in July, call features were added to the structures and the frequency of the reset reduced from semi-annually, as in earlier deals, to monthly and quarterly respectively. Kicker features - again a characteristic of some previous issues - that give additional coupon payments if conditions deteriorate and so provide investors with extra protection, were also removed.

With this added complexity, it's hardly surprising that when the Goldman sales team was briefed on these deals one or two members began questioning whether they could be sold.

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