Colombia

Two Colombian oil exploration and production companies began deal marketing on Monday as bankers and investors said that continued social unrest and political volatility in the country will not stop bond buyers from putting cash to work.

Chile, Peru and Colombia — previously hailed by EM investors for orthodox economic policymaking — are under pressure amid social unrest and political polarisation. But as the upheaval whirls around them, their credit in the bank with bondholders, after years of impressive debt management, is a major asset.

Colombia’s credit rating was finally downgraded to sub-investment grade on Wednesday evening, as many had expected it to be. But it was Standard & Poor’s — not Fitch, as most had anticipated — that moved first.

Investors in Latin America are growing increasingly concerned that social unrest in Colombia, where tax reform plans are in tatters and more than 40 people have been killed, is a sign of things to come, with sovereigns facing severe pressure as they attempt to improve credit profiles that have been battered by the coronavirus pandemic. Yet sovereign bond markets are seeing only modest, short-lived sell-offs, given the enormous liquidity still in bond markets.

AI Candelaria, the holding company through which private investors own a stake in Colombian oil pipeline Ocensa, returned to bond markets on Monday with a larger than expected $600m deal as Ocensa’s resilience during the coronavirus pandemic outweighed concerns about social unrest and a potential credit rating downgrade in Colombia.

AI Candelaria, the holding company through which private investors own a stake in Colombian oil pipeline Ocensa, is looking to issue senior secured bonds in the coming days as bankers say a sell-off in Colombian bonds remains relatively small despite major social unrest.

Colombia’s sovereign bonds continue to trade wider as the government faces fierce opposition to a tax reform designed to salvage its investment grade rating. As protestors flocked to the streets on Wednesday to oppose the bill, which is being debated in Congress, the deputy finance minister said that the final version of the reform may not be as positive for government revenues as the initial version.

Puerta de Hierro, a toll road project in Colombia’s Caribbean region, has tapped a combination of Colombian, Latin American and international investors to sell a Colombian peso inflation-linked social bond amid a wave of ESG-related issuance in Latin America.

Emerging markets bond buyers and issuers are regaining confidence as US Treasury volatility falls, with issuance in CEEMEA and Latin America having picked up in recent days and a pipeline building.

As Colombia’s government gears up for a political battle to push through a tax reform that may save its investment grade status, the sovereign’s head of public credit told GlobalCapital that the market reception of a dual tranche bond issue on Monday represented a vote of confidence from international investors.

Puerta de Hierro, a toll road project in Colombia’s Caribbean region, will begin investor calls on Monday as it looks to sell an inflation-linked Colombian peso-denominated social bond that has a double-A credit rating thanks to a guarantee from the US International Development Finance Corporation (DFC).

Colombian lender Banco Davivienda and Central American renewable energy company CMI Energía both priced new issues inside the ranges indicated at guidance on Thursday, as Latin American bond markets took advantage of a strong bid for US Treasuries.