Fitch: Latin American Debt Issuance at a Standstill
'Only Pemex and Cencosud (\$1 billion) have tapped the market in 2015 for \$6 billion, compared to corporate debt issues in late 2014 of \$600 million in December and \$2.7 billion in November,' said Joe Bormann, Managing Director at Fitch Ratings. 'The bond amortization schedule in 2015 is light due to the lack of market activity in 2008 with Fitch-rated issuers facing only \$5.5 billion of capital market debt maturities during 2015, compared to \$77 billion in 2014.'
'Debt maturities escalate in 2016, with corporates facing \$14.2 billion of debt amortizations in 2016 and \$27.6 billion in 2017. High-yield issuers account for \$3.8 billion and \$14.1 billion, respectively.'
Of the corporates with bonds maturing in 2015, Petrobras, is currently shut out of the capital markets but repaid its \$1.250 billion note during February 2015. With oil prices hovering around \$50 per barrel, PDVSA (CCC) is under extreme cash flow pressure and represents high default risk. Cemex ( rated 'B+' by Fitch) should easily be able to repay its \$750 million obligation falling due in September. Mabe (rated 'BB+') should also have no problem repaying its note in December.
Refinancing risk is elevated for high-yield corporates rated 'B+' or lower that issue bonds of less than \$400 million. The volatility in the market during 2014 led investors to seek benchmark-sized bonds with secondary market liquidity.
Capital market debt maturing between 2015 and 2017 is low as a percentage of total debt for 85% of the corporates in Latin America. For only seven of 43 corporates does this percentage exceed 40%. However, debt concentration is high for these corporates, as upcoming debt maturities average 80% of total debt.