LATAM Issuers ride high on hysterical quest for yield
Manic demand for returns is putting Latin American issuers in the driving seat, calling the shots on subjects such as length of maturity, target investor base and restructuring opportunities. Theodore Kim reports.
EMERGING MARKET DEBT issuance, particularly in Latin America, is sizzling. From 1,000 basis point spreads three years ago when Latin borrowers were forced to approach Wall Street hat in hand, the markets have rocketed. Today, the JPMorgan EMBI’s spread to US treasuries is hovering around an all-time low of 210bp. Latin American debt issuers can now pick and chose exactly what they want to issue and how their issues will micro-engineer their forward yield curve. They can even market themselves – much like equity issuers – to the types of long-term strategic investors they want holding their debt.
“Latin issuers – both banks and corporates – are obviously sitting in a very good position,” says Jay Tom, New York-based director of Latin debt markets at Standard Bank. “In terms of how they can develop and manage their capital structure, they have a lot of arrows in their quiver.” Recently, Standard lead managed a $400-million 10-year issue for Brazil’s Unibanco, one of the first private sub-sovereign Brazilian issues to extend out to 10 years. “Undoubtedly, there are a lot of very smart guys running these institutions,” Tom says.