EPP postpones euro deal; Colombia wider after election; Mexico quieter ahead of election

By Rebecca Melvin

New York, June 18 – Monday claimed another emerging markets debt primary deal, with EPP NV opening books on a euro-denominated benchmark only to announce shortly afterwards that it was postponing the transaction due to adverse market conditions.

Initial price talk for the Polish real estate investment company’s debut euro five-year notes (expected ratings: Ba1/BB+) was in the mid 3% area. And the company aimed to price a deal that was more than €400 million in size.

The postponement is the latest of a couple of deals that failed to price in the current market. Africa-focused Vivo Energy plc announced last week that it decided not to proceed with a planned issue of notes due to adverse market conditions.

EPP was to have been the first issuer of the Central & Emerging Europe region to price a deal since early May. Its postponement raises fears that the market may be shutting down early for the summer lull, with chances slimming that deals can push through before September, market sources have said.

In Latin America, Colombia’s bonds were slightly lower and slightly wider in spread across the curve on Monday after conservative candidate Ivan Duque won Colombia’s presidential election as expected on Sunday.

“It seems the election news was already priced in,” a New York-based market source said.

Mexico, which looks set to vote the opposite way when its presidential election is held in less than two weeks, has seen its international debt strengthen in the recently beaten down emerging markets debt space, but the bonds were decidedly quiet on Monday, a New York-based source said.

“Mexico is going to be quiet for the next two weeks at least, and [activity will be] depending on the new president and how the market perceives” the choice, the source said, adding that how aggressive or pliable his initial policy actions are will determine interest and/or risk taking in Mexico’s bonds.

In the meantime, it is going to be very quiet, especially in the new issue space, the source said.

Mexico’s presidential frontrunner is Andres Manuel Lopez Obrador, or AMLO, of the National Regeneration Movement. He is the leftist candidate, who is disliked by the business community but who has not specifically outlined how he will treat financial markets or even front-and-center issues like renegotiation of the North American Free Trade Agreement.

AMLO does not counter assertions that his victory at the polls will usher in a wave of societal upheaval on a large scale. Recently, he promised farmers free fertilizer and cheap fuel and said he supports establishing minimum price guarantees for homegrown crops. Nevertheless, observers say he is open to the NAFTA renegotiation.

“Canceling it is going to be a mistake. I don’t think his party would be able to continue on economically if NAFTA were cancelled,” a source said.

A number of Latin American countries are electing new presidents this year, and they are not shifting out in a wave going one way or the other politically.

“It’s country specific. Just because the right won in Colombia, doesn’t mean that’s how it’s going to go in Mexico,” the source said.

Brazil will also hold presidential elections on Oct. 7. Earlier this year Paraguay, Costa Rica and Venezuela held elections.

Elsewhere, New Delhi-based solar power producer Azure Power Global Ltd. said on Monday it has “strong” liquidity and expects its green bond will fuel growth.

“Our liquidity position continues to remain strong,” chief financial officer Sushil Bhagat said on the company’s fourth quarter and year ended March 31 earnings conference call.

“We believe we are well positioned to finance the projects we recently launched.

“As a result of reducing our loan balances following the issuance of our green bond, our borrowing capacity at the banks has increased,” Bhagat said.

Also on Monday, Mumbai-based IndoStar Capital Finance Ltd. informed the Bombay Stock Exchange that its board of directors approved up to Rs. 8 billion of secured and/or unsecured redeemable non-convertible debentures. The debentures will have a face value of Rs. 1 million each and will be issued via private placement in one or more tranches.

In addition, Karur Vysya Bank Ltd. informed the Bombay Stock Exchange that its board of directors will meet on June 25 to consider a proposal to raise capital via non-convertible debt.

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