MARKET TALK: Q3 2023 OUTLOOK
Despite a sharp drop in activity in the first half of the year, the region’s loan market is expected to rebound in the months ahead
Lending activity in Latin America and the Caribbean is expected to pick up in the second half of this year as more companies seek cheaper fundraising alternatives than the bond market while interest rates remain high, an analyst says.
“The banks are in decent shape in Latin America and internationally, and they continue to be good lenders,” says Lisandro Miguens, head of debt capital markets for Latin America at JPMorgan.
Companies in the region scaled back bond sales in the first half of this year on the higher costs, as rising inflation worldwide pushed up interest rates. The volume of domestic and international bond sales in the region fell 14% to $39.7 billion through June 15 this year from $46.4 billion a year earlier – and down 58% from $95.2 billion in the same period of 2021, according to data from Refinitiv.
Loans also took a hit, falling 39% to $10.8 billion through June 15 this year from $17.7 billion a year earlier and $18.9 billion in the same period of 2021, the data show.
More companies have been turning to multilaterals while interest rates have been high.
The multilaterals have been “extremely active,” Miguens says.
Indeed, the International Finance Corporation (IFC) recently granted a $400 million green and sustainability-linked loan to the Chilean subsidiary of French power company Engie to finance its shift to renewable power generation from fossil fuel sources and to install battery energy storage systems. Mexico's state-owned electric utility company CFE took out a 20-year, $98.7 million loan from French development agency AFD to finance a solar power plant project.
Sacyr Concesiones, the infrastructure concessions division of Spanish construction company Sacyr, borrowed €170 million ($187 million) from Brazilian national development bank BNDES to finance a highway public-private partnership.
Brazilian solar power distribution company Órigo Energia has requested $42.2 million in financing in Brazilian reais from the IFC to increase installed capacity to 50 MWac.
Miguens says companies also turned to the local bond market and alternative sources of financing through private placements over the last 15 months, he adds.
In recent loan deals, Mexican sports apparel and footwear manufacturing company Grupo Charly rolled over debt with a new loan for MXN2.56 billion ($149 million) from five banks, with the option to expand the facility to MXN3.11 billion. Fibra Macquarie, a Mexican real estate investment trust (REIT) associated with Australian financial services group Macquarie, took out two sustainability-linked loans for a total of $250 million. LF