Where are Latin American companies getting their funding? What is the future of the M&A market? A conversation with HSBC's Gerardo Matos.
There is a place on Fifth Avenue, on the corner of 40th Street in New York, where one can get a complete vision of Latin America's financial activity. The office of Gerardo Mato, CEO of Banking and Capital Financing for the Americas at HSBC Securities, has been one of the best locations to learn what Latin American countries and companies were mulling over as far as loans and bond financing.
HSBC was, and still is, one of the top players in debt capital markets. Now the bank has become an active player in the regional equity capital markets, with greater involvement in equity issuance and in mergers and acquisition (M&A). Today, a close look at their deal pipeline will give a very precise idea of how winds are blowing, and where things are headed.
A conversation with Mato quickly shows the where, and how, Latin American countries, and large corporations, are getting their funding. It is now including longer-term euro denominated debt. It also provides market participants a good pulse on merger and acquisition (M&A) activity for the region.
The bank loan market will not change that much in the coming months. "Liquidity from banks remains solid for high quality credits, evidenced by some large loans closed in the first half of 2015 mainly by corporations from Mexico, Colombia, Brazil and Chile," he said.
On the bond financing side, on the contrary, there has been a significant decline in volumes versus 2014. "To give you a sense, we are talking about $58 billion in 2015 year-to-date against $89 billion in 2014," he stated. In addition, not all bonds have an easy market.
The economic slowdown of the region, and the volatility introduced by the current Greek debt situation, have made investors much more selective on where to take their money.
Currently, Mato explained, Mexico is the undisputed star. The country accounted for 40 percent of the volume issued in 2015 by the region. Investors were especially attracted by the omens of greater growth, fostered by the energy reform. "Chile is also a very high-rated jurisdiction with less volatility and also looking to achieve long-term tenors.
The declining bond volumes were reversed in April and June, and activity was strong enough to put them in line with those of...