NEW YORK, Mar 21 (LPC) – Latin America’s most famous corporate debtors are more and more tapping the financial institution mortgage marketplace for low-value funding, finding an global lender base hungry to deploy capital and grow their dollar publicity to the area.
Banks active in lending to Latin American corporates including oil manufacturer Petróleo Brasileiro (Petrobras) and pulp and paper exporter Suzano Papel e Celulose are resorting to competitive pricing techniques this zone as competition has multiplied for the restricted to be had supply.
Deal-starved international financial institutions are hamstrung by way of the shortage of greenback-denominated transactions in Latin America while compared to volumes in advanced markets along with the US or Europe. Active creditors are continuing to jockey for function to steer high-profile financings, even if it means lower-fee funding for borrowers.
“There are many transactions, some in neighborhood currency with nearby banks, however those might be extra volatile and worldwide banks cannot fund these,” said a director at an worldwide funding bank energetic in Latin America. “Universal deals [in hard currencies such as dollars] that may be completed by means of international banks are constrained, which makes it aggressive.”
Petrobras and Suzano, which might be famous companies for US traders, have soaked up tons of the low-cost liquidity on offer to this point this yr.
The kingdom-subsidized oil producer is presently in market with a potential US$3bn-US$3.5bn syndicated loan and could pay 150bp over Libor, 20bp much less than the US$4.35bn revolving credit score facility Petrobras signed in March 2018. Citigroup, Crédit Agricole, JP Morgan, Mizuho and Scotiabank are syndicating the transaction.
Suzano signed this month a US$500m five-yr club loan with Bank of America Merrill Lynch, BNP Paribas, HSBC, Mizuho, Santander and Scotiabank that priced at more or less 100bp, according to a few bankers familiar with the transaction.
Comparatively, in March 2018 the company tapped the bank market for a US$9.2bn two-tranche financing to back its acquisition of local peer Fibria. Suzano signed a three-12 months loan priced among 116bp-133bp and a six-12 months transaction between 165bp-175bp, relying on the agency’s leverage stage. BNP Paribas, JP Morgan, Mizuho and Rabobank arranged remaining 12 months’s acquisition financing.
Heightened competition and confined supply, mixed with banks’ liquidity maintain to contribute to lower average pricing for syndicated loans, mainly for corporates in or close to high-grade territory. Brazilian corporations, as an instance, can get entry to spreads over Libor normally reserved for credits in funding grade-rated international locations no matter Brazil’s below-investment grade sovereign credit score score of Ba2/BB-/BB-.
Banks willingness to lend in Brazil also coincides with the u . S .’s new proper-wing management, that’s championing investor-friendly guidelines which includes the privatization of state-run belongings and pension reform.
Other Brazilian debtors, along with gas station operator Raizen and every other pulp producer Klabin, also tapped low fee financial institution debt from worldwide banks this 12 months, paying 105bp for a 5-12 months US$500m bundle and 135bp for a US$1.1bn five-year facility, respectively. BNP Paribas, JP Morgan, Mizuho and Scotiabank are arranging the power for Raizen even as Citi, HSBC, Mizuho and Santander led the transaction for Klabin.
Demand is not just limited to Brazil. Colombian power agency Grupo Energía de Bogotá (GEB) this month prolonged a five-12 months US$749m financial institution loan to mature in 2024 from 2022 and also decreased the charge of the power to 162.5bp from about 215bp when the loan changed into negotiated in 2017, two loans bankers familiar with the deal said.
Chilean miner Minera Los Pelambres signed a US$1.3bn funding package with lenders this month. Private banks led an US$875m seven-year tranche for 120bp over Libor, at the same time as the rest came from the Japan Bank for International Cooperation.
“Banks have had so much pent-up call for for the location,” said a managing director that covers company lending in Latin America. “So when a deal launches, they’re simply flying off the blocks.”
TOO LITTLE FOR TOO MANY
Syndicated mortgage issuance in Latin America swelled above US$40bn for 2018, the best figure considering that 2007, consistent with records from LPC, a unit of Refinitiv. Deal float changed into driven especially through massive-scale acquisition financings which includes Suzano’s purchase of rival pulp organisation Fibria and billion-dollar credit score facilities from the likes of Petrobras and petrochemicals organization Braskem, among others.
A weaker bond marketplace, hindered with the aid of worldwide volatility in 2018, also propped up volumes ultimate yr as corporates grew to become to less-unstable syndicated loans.
Despite the file extent, Latin American greenback-denominated loan supply pales whilst as compared to international banks’ liquidity in the course of the place, making lending exceptionally aggressive amongst bankers.
At any given time, there are hardly ever extra than a handful of transactions that international banks’ credit score committees will approve, according to the investment financial institution director who spoke on the circumstance of anonymity as transactions are non-public. And even as bankers stopped quick of dubbing the area ‘over-banked,’ the dearth of deliver can deliver off a belief that Latin America is saturated with global banks.
As momentum returns to Latin America’s international bond market, there’s doubt that mortgage issuance volumes will attain the heights of 2018, according to several banking assets. But official corporate debtors cozy with three-, five-, or in some instances, seven-year maturities, are still expected to continue to discover a less expensive source of capital within the financial institution market. (Reporting by way of Aaron Weinman; Editing through Michelle Sierra and Lynn Adler)