Latin America Borrowers Look to Seize on Post-Election Debt Rush

(Bloomberg) -- Latin American borrowers are joining the post-election debt rush, seeking to capitalize on a jubilant mood in credit markets before the stark realities of the worsening coronavirus epidemic can chill demand.

Three companies are selling debt in the most active week for the region in more than a month. Mexican telecommunications firm Total Play Telecomunicaciones SA priced a $575 million junk-bond offering Monday. Peruvian health care company Auna SA and Panamanian toll road operator ENA Sur both hope to follow suit in the coming days, according to people familiar with the transactions and credit agencies.

“The resolution of the U.S. elections combined with the positive vaccine news has indeed been like rocket fuel for emerging markets,” said Guido Chamorro, co-head of emerging-market hard-currency debt at Pictet Asset Management in London.

Chamorro, who expects other sovereign and corporate borrowers to test demand in coming days, said emerging-market investors who trimmed their positions prior to the U.S. vote on Nov. 3 are rushing to reinvest.

Yields on speculative-grade debt from developing nations dipped to around 6.75% Tuesday, the lowest this year, according to Bloomberg Barclays index data. Credit markets have rallied this week following Joe Biden’s victory in the U.S. presidential election and positive results from Pfizer Inc.’s clinical trials for a Covid-19 vaccine.

For Latin America, the issuance marks a reversal from late September, when a handful of Brazilian companies pulled junk-rated deals as investor sentiment waned.

This week’s borrowers are taking advantage of a “window of opportunity” before them, said Soummo Mukherjee, a senior credit analyst at Lucror Analytics.

Covid Risk

Total Play paid 7.5% to borrow for five years Monday. Auna, which operates hospitals and clinics in Peru and Colombia, is expected to sell around $300 million of high-yield notes in its debut international offering.

ENA, a state-owned operator of highways, is offering $400 million of investment-grade notes due in 2048, according to Moody’s Investors Service.

The companies may be looking to get ahead of the looming uncertainty posed by the global surge in Covid-19 cases, according to Chamorro.

“The second wave is the most visible risk to the current rally,” he said. “That’s why issuers might not want to tempt fate by waiting too long.”

By Ezra Fieser