(Updates with pricing of new issues in paragraphs 3, 13)
By Tatiana Bautzer
NEW YORK, March 30 Latin American governments
and companies could soon step up bond sales, seizing on
increased deal appetite as a regional economic recovery gains
steam and concerns about potential aggressive U.S. policy
changes ease, bankers and investors said this week.
Attractive returns on Latin American debt and demand for
less traditional structures have allowed the Brazilian
government to sell debt at record low yields. Suzano Papel &
Celulose SA subsequently placed a 30-year junk bond,
the first of its kind for a Brazilian firm, this month.
Arcos Dorados Holdings Inc, the world's largest
McDonald's restaurant franchisee, and Chile's Empresas
CMPC SA raised a total $765 million through the sale of
10-year bonds in separate deals. Brazilian logistics firm JSL SA
could be next in line soon, two people familiar with
the plans said.
Concerns that U.S. President Donald Trump's policies would
lure capital away from Latin America have subsided, bankers and
executives said. Inflows are also being fueled by market
stability after the U.S. Federal Reserve's single rate hike so
far this year.
Emerging market funds had $6.5 billion in net inflows in the
week ended March 22, their most in nearly four years, Institute
of International Finance data showed, with about $4.5 billion
going to bonds.
"We'll still see a lot of debt refinancing deals, but there
are a few first-time issuers tapping the market," said Felipe
Wilberg, global head of fixed income for Itaú BBA SA, which is
hosting an annual Latin American debt capital markets conference
in New York.
According to other bankers, who asked for anonymity to speak
freely about market trends, cheaper funding for the region's
borrowers largely hinges on the ability of several governments,
like Brazil's, to get congressional approval for key fiscal
reforms ahead of a busy Latin America election calendar.
Investors initially expected Trump-related turmoil to slam
the brakes on access to capital markets in Latin America, which
has struggled with the end of a decade-long commodities
The premium that investors demand for Latin American bonds
over U.S. Treasuries stands at about 7.59 percentage points,
compared with about 7.14 points at the start of the year,
according to JPMorgan's EMBI Diversified Latin America bond
However, the pushback has been minor compared with prior
U.S. tightening cycles that triggered violent swings in Latin
American issuers' borrowing costs.
Spreads have tightened somewhat across the region, said
Baruc Sáez, Itaú BBA's managing director of international fixed
"Although conventional wisdom states that U.S. rate hikes
lead to pressure on asset prices in emerging markets, we are
seeing a different reaction from investors," said Marc Nachmann,
head of Latin America for Goldman Sachs Group Inc.
Earlier in the day, pulpmaker CMPC sold $500 million of
so-called Green bonds at a lower-than-targeted yield of 4.42
percent. Arcos Dorados sold $265 million in global notes at 5.85
percent interest, below initial guidance of 6 percent.
JSL, the logistics firm, is discussing a potential $300
million global bond deal with banks that will have to be fully
hedged against currency fluctuations because the company's
revenues are all denominated in Brazilian reais, a person with
direct knowledge of the transaction said.
Western Asset Management Co has raised the Latin American
share of its emerging markets debt positions to 47 percent from
40 percent over the past year, as prices turned attractive and
the outlook improved, said Mark Hughes, who helps oversee $40
billion in emerging market bonds for the firm.
The ramp-up has been gradual though, Hughes said, noting
that bonds from Brazilian exporters now offer a better entry
point than those of domestic-oriented companies.
Latin American sovereign and corporate borrowers have raised
$34 billion from bond sales this year, according to Itaú BBA
data. Last year, bond borrowing in the region reached $102
Bankers are raising their estimates for new Latin American
bond supply this year to $80 billion from as low as $60 billion
in November as the initial negative sentiment on Mexico has
In the case of Brazil, President Michel Temer's progress in
pushing reforms has fueled demand for bonds like Suzano's.
"When the deal hit the road, we sensed that investors were
in general more optimistic about fiscal consolidation than they
were a year earlier," Marcelo Bacci, Suzano's chief financial
officer, said in an interview.
(Additional reporting by Paul Kilby in New York; Editing by
Guillermo Parra-Bernal, Christian Plumb and Tom Brown)