Mexico

As investors single out Mexico’s response to Covid-19 as one of the least convincing in Latin America, Fitch threw government-owned oil company Pemex and its $80bn of bonds deeper into sub-investment grade territory on Friday.

EM bond bankers were feeling relieved after a better day for global markets on Thursday, as they said some of the asset class’s best issuers were lining up deals hoping to clinch much-needed funding.

Mexico petrochemicals company Grupo Idesa on Monday issued a supplement to the offering memorandum on a distressed bond swap as it attempts to avoid default by persuading bondholders to push out the maturity on a $300m bond due in December.

Latin America bonds may not be immune to the generalised improvement in tone in credit markets this week, but that secondary markets remains dysfunctional and a return to primary market action could be some way away.

Mexican petrochemicals company Grupo Idesa is offering bondholders a collateral package and higher coupon to participate in a bond exchange that would allow it to avoid default later this year.

Emerging market bond conditions got worse and worse this week as investors struggled to sell bonds quickly enough to keep up with outflows. Though some investors said they had lined up a shopping list of cheap purchases, it could be some time before they decide to pounce.

Even the top-rated emerging markets corporates are mostly preferring to keep cash on hand rather than take advantage of a sharp fall in bond prices to repurchase debt cheaply, bond bankers said this week.

Latin America bond issuers and investors were thrown deeper into the coronavirus crisis on Monday, with Friday’s spread tightening more than cancelled out as the US Federal Reserve’s surprise 100bp rate cut on Sunday failed to arrest a fall in risk assets.

Bond syndicate bankers covering Latin America were not ruling out a return of new issuance in the next two weeks as the market tone improved on Tuesday after a bleak Monday. But with fears around negative fund flows growing, it may be hard to persuade investors to put cash to work even if valuations look attractive.

On what some EM investors described as the worst day for markets since 2008, Latin American bond buyers were left staring at a sea of red as the region’s fixed income markets were stunned into dysfunction by the sharpest fall in oil prices since 1991.

Mexican hotel operator Grupo Posadas became the first Latin American issuer to suffer a ratings action as a direct result of the Covid-19 coronavirus outbreak, with both tourism industry and capital markets conditions worsening while a bond maturity looms.

Mexican non-bank lender AlphaCredit has launched a consent solicitation, as it seeks to make amendments to the indenture governing its 2022 notes.