Mexico has become the latest emerging market sovereign to conclude a liability management exercise, saving some $55 million and helping to lower external debt as a proportion of total public debt from 33% to 28% by the end of the year.
Liability management has grown in popularity in recent years, thanks to relatively benign market conditions and emerging market economies’ improving fundamentals, which have allowed them to act more strategically than before.
Lebanon was one sovereign to take advantage of a period of greater confidence in its debt – at least before this summer’s conflict – successfully completing several liability management transactions. Its most recent foray came in April, when it sold three new Eurobonds totalling more than $2.6 billion that enabled it to reduce its coupon payments and extend its debt maturity profile.
There are several sovereigns, though, for which a liability management exercise would make a great deal of sense but that have not yet undertaken one.
One such is Turkey, which is believed to be considering such a programme. Economy minister Ali Babacan told investors earlier this year that the sovereign was looking at swapping some of its short-term international debt for longer-dated issues.