Debtwire Latin America Forum

December 2017 | New York

Explore the opportunities, risks, and trends in Latin America

Growth and interest rate differentials have lured in global portfolio investors to the market of higher-yielding Latin American assets. Spreads on high-yield emerging-market corporate bonds, as measured by JPMorgan’s benchmark emerging-market corporate bond index, are tighter than their US equivalents, mainly because of the dramatic compression in the spreads on Asian and emerging European high-yield debt. Credit investors are also keeping a close eye on key restructurings throughout the Latin region to gauge priority of claim position strength and recovery rates.

While many Latin governments have strengthened their balance of payments and local high yield corporates have cleaned up their balance sheets and lowered expected default rates, challenges remain: In addition to Mexico and Brazil, four other major elections will be held in 2018 in key Latin American countries. There remains much deviation in terms of trade, balance of payment and monetary issues for each respective country, in what seems a north-south continental divide in policy. Inflation, commodity prices and critical legal developments in corporate restructuring cases remain serious issues as well.

Please join the Debtwire team and esteemed panelists for a thorough discussion of credit opportunities in Latin America and beyond in 2018.

Agenda

Brazil Regains Momentum

Despite political challenges, business confidence indicators since 1Q17 show signs of improvement while analysts expect the Brazilian economy to grow 2% – 2.5% in 2018. Since its central bank embarked on a pro-growth strategy the Brazilian Real has been the best global performer gaining 33% against the US Dollar. The country's creditworthiness has materially improved as well. However, many Brazilian companies are still trying to turnaround operations and balance sheets, but recalcitrant creditors have slowed progress. For instance, telecom giant Oi continues to work with its creditors and shareholders over changes to its restructuring plan after many stakeholders disliked its initial version.

Delegates will listen to panelists discuss Brazil's most pressing corporate restructurings and negotiations.

  • What precedent did the Sao Paulo State Court of Justice set when it ruled in favor of Schahin's restructuring plan over creditor objections, citing "labor" and "economic" grounds?
  • Examining stakeholder reaction to Oi's recent restructuring plans and potential impact on negotiations.
  • Discussing Samarco's new business plan and odds for brokering deal with bondholders.
  • Exploring the construction industry in a post-Odebrecht world.
  • Analyzing creditors' and investors' comfort level with various "improved" companies who experienced distressed situations this time last year.
  • A look at market trends to forecast credit opportunities, such as credit default swap spreads, and where political reforms stand.

Mexican Headwinds Begin to Dissipate

A rising rate environment, lower commodity prices and contentious trade relations with the US are creating a challenging environment for balance sheet restructurings. The Mexican peso has been on a roller coaster ride. Oil drillers, such as Oro Negro, are still struggling to cope with market equilibrium while the auto industry confronts possible tariffs from its neighbor to the north. Turnaround efforts with creditors for companies such as Empresas ICA, remain difficult thanks to the lingering effects of the 2014/16 commodities bust. However, with regards to economic growth, headlines seem deceiving as communications, financial services and some manufacturing look to grow.

Listen to panelists discuss the economic and restructuring environment throughout Mexico:

  • How are auto parts manufacturers, such as Nemak, Rassini and others, reacting to US tariff threats from the new administration? What will this mean for revenues and costs?
  • Assessing legal developments in Abengoa Mexico, Oro Negro, CP Latina and others while considering backdrop of rising rates, commodity price swings, and MXN/USD exchange rate.
  • Examining what hinges on a successful Empresas ICA turnaround.
  • Discussing outlook for oil asset privatizations over next 12 months.
  • NAFTA renegotiations and Mexico's precarious current account balance situation.

The Emerging Andean Region

The Andean economies and companies represent great opportunity for credit as several countries continue to grow and reform. The normalization of copper price trends has stabilized the Peruvian sol (PEN) and Chilean peso (CLP) while the Colombian peso (COP) continues with volatility. In Ecuador, newly elected President Lenin Moreno has surprised many with market-friendly economic announcements. While some projects have been canceled, Peru will use up to half of the USD 8.3bn in Fiscal Stabilization Fund to partially finance infrastructure projects, creating opportunity for investors. Also, investors are finding that Argentina represents an opportunity to diversify their Latin American investments as the country continues on a path of reform and growth.

Delegates will have an opportunity to hear about the risks and rewards in credit throughout the Andean Mountain range.

  • Assessment of Colombia Telecomunicaciones. How will the company address the Parapat pension obligations/liquidity? On what terms will the government provide equity and then exit?
  • How will delays in Peruvian infrastructure projects impact foreign investor opportunities? Also, Andino Investment Holding and Ajegroup have seen their bond prices rebound, what does this tell investors about the environment in Peru and confidence in single A credits?
  • Examination of potential change in Venezuelan government. What would a new government mean for continued meeting of debt service obligations? Would a new government likely restructure or default and how would either outcome transpire?
  • Explore Chilean bus company Inversiones Alsacia's bankruptcy case vs. its failed US Chapter 11 hearing.
  • How have new Argentine corporate issuers performed thus far? How have energy sector regulatory reform and new policies benefited issuers? Is the Macri Administration meeting expectations?
  • Analyze the region's various exchange rates, government spending, balance of payments, terms of trade, corporate leverage, local currency debt performance and other indicators.

Looking for Opportunity in Other Emerging Economies

The J.P. Morgan Corporate Emerging Markets Bond Broad index has performed better than a balanced portfolio of US corporate bonds in eight of the past 13 years. Corporates in emerging markets are also experiencing declining default rates with only one default in 1Q17 compared to eight during the same period in 2016. This is mostly due to emerging market companies introducing changes to transparency practices and becoming better equipped to service international investors.

Delegates will discuss the most lucrative opportunities abroad.

  • Assessment of China's leverage growth, manufacturing productivity and corporate performance.
  • Explore India's economic growth and reforms, budget deficit and credit opportunities around infrastructure and other sectors.
  • Evaluate the latest China Fishery Group developments in US bankruptcy court.
  • How will Federal Reserve rate hikes, unwinding of balance sheet and related policies impact emerging markets?
  • Will calls for protectionism within the Trump Administration chill global credit returns?

Conclusion of Forum

*Agenda is preliminary and subject to change.

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