Brazil

DCM bankers covering Brazil are hopeful that liability management exercises from financial institutions may provide them with something to do in the coming weeks as the new issue market suffers depressed volumes.

Buy and sell side credit traders expressed disappointment on Thursday, after the US Federal Reserve elected to keep interest rates on hold.

Troubled Brazilian shopping centre owner General Shopping Brasil has launched a heavily discounted tender of its 10% senior perpetual notes in an effort to reduce its dollar debt, although Fitch says that a debt restructuring is “likely to occur in the near future”.

Banco do Estado do Rio Grande do Sul (Banrisul) has become the third Brazilian lender to launch a tender offer for existing debt as bond prices in the country hit lows.

The downgrade of Brazil by Standard & Poor’s into sub-investment grade territory on Wednesday had been seen as inevitable for nearly two months. But when it came, the downgrade was as brutal as it could have been.

Brazil’s downgrade to junk will come as little surprise to market observers, given the increasingly bearish sentiment seen in Brazilian sovereign bonds.

Standard & Poor’s put the Brazilian sovereign into sub-investment grade territory late on Wednesday in a move that came sooner than most had expected but had already been accepted as inevitable.

General Shopping Brasil has exercised its right to defer the payment of interest on its $150m 12% perpetual subordinated notes, meeting the expectations of credit analysts.

Brazilian low-cost airline Gol Linhas Aereas Inteligentes became the latest high yield issuer from Latin America to be downgraded on Monday as recession in the region’s largest economy hit passenger demand.

The brutal sell-off that afflicted Brazilian bonds in July appears to have slowed somewhat amid the low trading volumes of August, though economic bad news and political troubles show no sign of abating.

Banco ABC Brasil, a subsidiary of Arab Banking Corp (Bank ABC), has closed syndication for its $150m two year loan, increasing the deal to $200m.

South Africa is experiencing a difficult week in credit markets, with credit default swaps that reference its debt hitting their widest point for two years.