WEBVTT - Libor-SOFR Switch Angst; LatAm Energy View

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<v Speaker 1>Hello, and welcome to The Credit Edge, a weekly markets podcast.

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<v Speaker 1>My name is James Crumbie. I'm a senior editor at Bloomberg.

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<v Speaker 1>Today's guests are Paula Seligson, who covers leveraged finance at

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<v Speaker 1>Bloomberg News. We're delighted to have you on the show.

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<v Speaker 1>Thanks for having me. We're also very happy to welcome

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<v Speaker 1>jam And Patel, who looks at utilities and energy companies

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<v Speaker 1>for Bloomberg Intelligence. We'll be discussing Latin American oil producers

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<v Speaker 1>with him in a bit. Please to join you. But

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<v Speaker 1>before we do, let's talk libor transition, by which we

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<v Speaker 1>mean the switch to a new price benchmark for the

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<v Speaker 1>trillions of dollars in assets that need to happen over

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<v Speaker 1>the next few months. But by all accounts, it's not

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<v Speaker 1>going very well, so let's get straight to it. Paula,

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<v Speaker 1>what's the latest you're hearing on this. I am glad

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<v Speaker 1>you asked, because I love talking about libor. So essentially

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<v Speaker 1>we have to first take this context of the whole

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<v Speaker 1>libor transition. So a lot of asset classes have been

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<v Speaker 1>doing fine, but specifically in the one point for trillion

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<v Speaker 1>US leverage loan market, we're down to the wire. It

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<v Speaker 1>goes away in the middle of this year, but there

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<v Speaker 1>are still controversies as companies switch their existing loans from

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<v Speaker 1>libor to SOFA, the secured overnight financing rate the preferred

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<v Speaker 1>replacement in the United States. So we've been covering a

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<v Speaker 1>lot of stories about how there have been some cases

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<v Speaker 1>where lenders are upset essentially about the credit spread adjustment.

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<v Speaker 1>This is a special extra little bit of basis points

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<v Speaker 1>that you add in to the coupon on the loan

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<v Speaker 1>in order to compensate for how LIBOR typically prints above

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<v Speaker 1>where SOFUR does, and so there have been cases where

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<v Speaker 1>lenders have been trying to organize to vote against it,

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<v Speaker 1>and this time we've recently done a story about cases

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<v Speaker 1>where lenders don't get a chance to vote at all

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<v Speaker 1>when these things are changed. So specifically, what we're looking

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<v Speaker 1>at is essentially, if you look at the universe of

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<v Speaker 1>existing leverage loans, they all have this special, essentially legal

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<v Speaker 1>documentation built into them that will allow for an easier

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<v Speaker 1>switch from libor to SOFUR, And for roughly thirty percent

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<v Speaker 1>of the market they have this way where you can vote,

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<v Speaker 1>and there's been some controversy there. You can see our

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<v Speaker 1>prayer coverage, but a recent story is about twelve percent,

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<v Speaker 1>where essentially you don't have to vote if you're the company.

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<v Speaker 1>What happens is essentially, if you switch from libor to

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<v Speaker 1>sofur and you're the company and your bank that's been

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<v Speaker 1>helping you with this, agrees to the rate and the

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<v Speaker 1>credit spread adjustment, you're good and you don't have to

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<v Speaker 1>ask for a vote as long as you're doing what's

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<v Speaker 1>considered the market standard. But what's been happening is there's

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<v Speaker 1>been bickering over what exactly is the market standard. So

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<v Speaker 1>what we've seen is some companies have used a ten

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<v Speaker 1>basis point credit spread adjustment during this transition instead of

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<v Speaker 1>using a staggered credit spread adjustment that was essentially recommended

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<v Speaker 1>by a regulatory body, where they recommend eleven basis points

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<v Speaker 1>or twenty six basis points if you're borrowing on a

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<v Speaker 1>one or three month basis. So essentially, I like lenders,

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<v Speaker 1>These asset managers have been getting these notifications that say, hey,

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<v Speaker 1>by the way, your libel loan is now a sofa

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<v Speaker 1>loan and it used a ten basis point credit spread adjustment,

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<v Speaker 1>and they go, wait, hang on a minute, I wanted

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<v Speaker 1>to vote on this. This isn't the market standard, but

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<v Speaker 1>the company's perspective as they did pick the market standard

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<v Speaker 1>because there have been other loans that have flipped this way,

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<v Speaker 1>and so it's messy, it's complicated. Honestly, I can see

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<v Speaker 1>both sides of it, depending on how you think about

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<v Speaker 1>the market. And so we've been really trying to reflect

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<v Speaker 1>in our coverage how this is very much still a

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<v Speaker 1>price discovery and there's still a lot of arguing between

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<v Speaker 1>lenders and borrowers as this unfolds. That's great, but in

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<v Speaker 1>simple terms, we're talking about risky companies borrowing from banks

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<v Speaker 1>in what we call the leverage loan market, and the

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<v Speaker 1>basis on which their price is changing, and somebody's losing

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<v Speaker 1>out here, yes, exactly. So that's all about that credit

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<v Speaker 1>spread adjustment. So on one hand, you have the company

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<v Speaker 1>and they've borrowed sometimes billions of dollars from large groups

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<v Speaker 1>of institutional asset managers in this market called the leverage

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<v Speaker 1>loan market. And so if the thing is the difference

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<v Speaker 1>between libor and sofur, because both them are floating rate,

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<v Speaker 1>right like, both of those are benchmarks that change over time,

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<v Speaker 1>so the difference between them also changes over time. So

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<v Speaker 1>there's a special group that's endorsed by regulators called the

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<v Speaker 1>Alternative Reference Rates Committee, and so they tried to solve

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<v Speaker 1>this problem, and in March of twenty twenty one, they

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<v Speaker 1>picked essentially the five year historical median of the difference

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<v Speaker 1>between these two rates to set their own recommendations, and

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<v Speaker 1>that's where that eleven basis points for one month and

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<v Speaker 1>twenty six basis points for three months comes from. So

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<v Speaker 1>in theory it should reflect the fact that this changes

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<v Speaker 1>all the time. But right now, overall the difference between

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<v Speaker 1>the rates is smaller than where the arc that regulatory

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<v Speaker 1>group set these recommendations, and so it's just arguing over

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<v Speaker 1>basically pricing. Essentially, you know, if the borrowers lock in

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<v Speaker 1>a lower rate, they essentially save interest expense, but then

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<v Speaker 1>that's at the expense of the lenders who length them

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<v Speaker 1>the money in the first place. This is especially tricky

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<v Speaker 1>for what are called clos or collateralized loan obligations, because

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<v Speaker 1>they pull a bunch of loans and then structure it

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<v Speaker 1>in the special type of structured financial product and then

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<v Speaker 1>sell that in bonds, and those bonds will have certain

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<v Speaker 1>ways that they flip as well. So they could actually

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<v Speaker 1>lose a lot in the difference if it's not the

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<v Speaker 1>type of credits preadadjustment that they want. So much of finance,

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<v Speaker 1>so much of lending is based on libel consumer loans,

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<v Speaker 1>car loans, credit cards. Why is the leverage loan market

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<v Speaker 1>such a legod in all this, It's because it's very bespoke.

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<v Speaker 1>If you talk to people in the market, they kind

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<v Speaker 1>of brag about the fact that it's a very opaque market.

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<v Speaker 1>There's not a lot of electronic trading each loan is.

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<v Speaker 1>It's not out of security. It's very customized and specific.

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<v Speaker 1>And to even participate you have to be a very

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<v Speaker 1>large institutional asset manager like normal people like me and you,

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<v Speaker 1>we can't buy this kind of debt, right, And so

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<v Speaker 1>the actual structure of the loan market is almost kept

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<v Speaker 1>like purposely opaque and complex because companies want it to

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<v Speaker 1>be customized and very private. And so usually that's quite

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<v Speaker 1>frankly fine. It you know, goes along quite well. There's

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<v Speaker 1>massive volumes every year of new deals. Things are refinanced,

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<v Speaker 1>leveraged buyouts are financed. There, it's not a problem. But

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<v Speaker 1>when you take that you know, customized market, you know,

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<v Speaker 1>a very opaque market and apply it to something as

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<v Speaker 1>complex as the lieboard transition. That's why you start to

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<v Speaker 1>see these very interesting situations come up. What's the deadline

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<v Speaker 1>to switch over to the new benchmark the end of

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<v Speaker 1>June of this year, and that is already an extension

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<v Speaker 1>of the original deadline. So do we face some kind

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<v Speaker 1>of catastrophe when we hit that deadline? That is unlikely.

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<v Speaker 1>Most loans have some kind of fallback language that will

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<v Speaker 1>essentially default them to the spread adjustments recommended by the ARC.

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<v Speaker 1>But there are certain chunks of loans, the thirty percent

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<v Speaker 1>of negative consent, the twelve percent of no lender consent,

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<v Speaker 1>and those are the ones where we're going to see

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<v Speaker 1>some weird variability. The worst case scenario for some companies

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<v Speaker 1>is that if they absolutely cannot get their stuff together

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<v Speaker 1>and they flip to nothing come July first, they will

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<v Speaker 1>fall back to what's called the prime rate, and that

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<v Speaker 1>is roughly seven point seven five percent now, so the

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<v Speaker 1>risk is if their companies would fall through the cracks,

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<v Speaker 1>they will suddenly see their interest expense spike significantly by

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<v Speaker 1>roughly three percent percentage points. Great, okay, very interesting. What's

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<v Speaker 1>the next thing to watch here? What are we looking

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<v Speaker 1>at in terms of short term the developments in this story.

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<v Speaker 1>We're just waiting to see how fast the market transitions.

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<v Speaker 1>So roughly twenty five percent of the leverage loan market

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<v Speaker 1>has transition to sofur and we're now just basically waiting

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<v Speaker 1>to see how fast or how long it takes for

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<v Speaker 1>the remaining seventy five percent to make the switch. And

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<v Speaker 1>how is all this drama affecting the broader credit markets

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<v Speaker 1>In a lot of ways, it's not doing that much

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<v Speaker 1>Like this is just sort of going along in the background.

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<v Speaker 1>You know. We have, separately from that, we've seen sort

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<v Speaker 1>of this rally and credit markets in January, and that

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<v Speaker 1>rally has begun to pull back in leverage LANs that

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<v Speaker 1>we've been talking about. Leverage lanes have actually held up

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<v Speaker 1>pretty well and we still have a lot of issuance there.

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<v Speaker 1>But in high old bonds, which are a very related

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<v Speaker 1>asset class, we've seen yields go up and we've seen

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<v Speaker 1>issuance of new debt really slow down in recent days.

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<v Speaker 1>Thank you, Paula Selexon. We look forward to reading your

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<v Speaker 1>scoops and listeners can can read all of your news

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<v Speaker 1>and analysis of leverage finance and other credit markets, and

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<v Speaker 1>our global team by by Paula and our global team

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<v Speaker 1>of credit reporters on the Bloomberg terminal or at Bloomberg

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<v Speaker 1>dot com switching gears here a bit. As I mentioned earlier,

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<v Speaker 1>we have very lucky to have Jamie Patel from Bloomberg Intelligence. Now,

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<v Speaker 1>I mean, you look at the energy sector in Latin America,

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<v Speaker 1>which is always exciting. Um I was, you know, I've

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<v Speaker 1>been covering that that region and that particular sector for

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<v Speaker 1>quite a long time. We've got Pemex in Mexico, We've

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<v Speaker 1>got Petrobras in Brazil, Echo Petrel in Colombia. The region

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<v Speaker 1>is full of huge state owned energy companies, you know,

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<v Speaker 1>some of the biggest in the world. I've spent time

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<v Speaker 1>at Pemex City in Mexico City, which, as it suggests,

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<v Speaker 1>truly is a city within a city. These companies are massive, really,

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<v Speaker 1>and they're also huge borrowers in the dollar markets, and

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<v Speaker 1>so international investors are very exposed. But I just wanted

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<v Speaker 1>to start jam And by asking you what's the general

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<v Speaker 1>state of this industry is it? Is it in good shape?

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<v Speaker 1>I think I think generally it's in better shape than

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<v Speaker 1>it was a year ago. Certainly old prices, having rallied

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<v Speaker 1>the way they did, even though they've come down quite

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<v Speaker 1>a bit, have enabled these companies to significally repair the

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<v Speaker 1>boundaries at Petro Brass sit yet by almost fifty percent UM.

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<v Speaker 1>If you know, you've got Whitepf and Champaigner here in

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<v Speaker 1>uh In in Argentina UM, which are you know, much

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<v Speaker 1>smaller companies, but UM just as interesting UM and and

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<v Speaker 1>and just as much in the minds of investors, high

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<v Speaker 1>yield energy investors as perhaps some of the others UM

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<v Speaker 1>that have really managed to bring their leverage down now

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<v Speaker 1>not to the extent that you've seen with the oil majors,

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<v Speaker 1>but but quite significantly been able to repair their balance sheet.

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<v Speaker 1>They haven't always been known for their efficiency though, how

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<v Speaker 1>how good are they are doing what they do compared

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<v Speaker 1>to the oil majors. What you know, what's the cost

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<v Speaker 1>of production for for a barrel of oil? Well, you know, interestingly,

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<v Speaker 1>if you look at their ebidax margins UM, they are

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<v Speaker 1>very competitive. They're significantly higher than the oil majors. And

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<v Speaker 1>you know, here I'm talking about not just the big

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<v Speaker 1>one like Echo Control and Petro Bron, but also Whitepf, uh,

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<v Speaker 1>not so much, panics. Um, And there's there's a perhaps

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<v Speaker 1>a different story, Um. But the reason is not necessarily

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<v Speaker 1>because they are more efficient. They do have you know,

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<v Speaker 1>quite competitive lifting costs, but because their focuses so much

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<v Speaker 1>on crude oil than it is on natural gas. When

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<v Speaker 1>we saw the rally in crude oil prices, um, before

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<v Speaker 1>we saw the rally in natural gas prices, their margins

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<v Speaker 1>obviously will end up significantly more. Now when we see

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<v Speaker 1>the twenty twenty two earnings results come in, Um, you know,

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<v Speaker 1>part of that edge may have may have dissipated, but

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<v Speaker 1>now on natural gas prices have come down very significantly,

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<v Speaker 1>both European and US natural gas prices. So to the

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<v Speaker 1>extent that that affects their their pricing, Um, you'll see them,

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<v Speaker 1>i think, regain regain the margin edge that we had

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<v Speaker 1>seen them enjoy it before. But how exposed are they

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<v Speaker 1>to the drop in oil prices. You know, we're heading

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<v Speaker 1>potentially into recession in the US, which isn't good for

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<v Speaker 1>oil demand, and you know that's going to be lower prices.

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<v Speaker 1>Are they edged at all? Well? Again, it really depends

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<v Speaker 1>from a country to country. UM. I think you know

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<v Speaker 1>you've heard of the Hacienda edge in in Mexico. UM.

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<v Speaker 1>Now that's that's the government hedge. But all of these

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<v Speaker 1>companies will have hedge to a certain extent. Clearly, Lord

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<v Speaker 1>uh crew all prices will have hurt their bound sheets

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<v Speaker 1>in their earnings to some extent. But again, as I said,

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<v Speaker 1>it really depends on which company you're talking to. If

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<v Speaker 1>you look at the pemics, for instance, UM which has

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<v Speaker 1>a significant shortfall of refining capacity and will do so

0:12:36.200 --> 0:12:42.479
<v Speaker 1>until it completed it just podcast massive boast refinery in Tabasco,

0:12:43.080 --> 0:12:48.600
<v Speaker 1>UM they will continue to UM have to continue will

0:12:48.640 --> 0:12:52.959
<v Speaker 1>continue to have to import significant amounts of expensive UM

0:12:54.559 --> 0:13:00.079
<v Speaker 1>finished products, including gasoline and diesel. UM. So you may

0:13:00.120 --> 0:13:02.439
<v Speaker 1>have natural, you may have crew pro or prices coming

0:13:02.480 --> 0:13:06.160
<v Speaker 1>down that impacts the revenues from crude, but you also

0:13:06.240 --> 0:13:10.080
<v Speaker 1>have this offset from lower prices, significantly lower prices or

0:13:10.120 --> 0:13:13.600
<v Speaker 1>the fuel. So yes, there will be a learning impact,

0:13:14.200 --> 0:13:17.280
<v Speaker 1>certainly for Pemics, not so much for Petrol Brown which

0:13:17.400 --> 0:13:21.760
<v Speaker 1>which has significantly refining capacity, and for Ecodrow. But again,

0:13:21.760 --> 0:13:23.480
<v Speaker 1>as I said, it really depends on the company you're

0:13:23.480 --> 0:13:26.840
<v Speaker 1>looking at. Okay, that's interesting. One thing I've noticed Jayman

0:13:26.920 --> 0:13:30.080
<v Speaker 1>on the on the bond side. Um, the debt is

0:13:30.120 --> 0:13:33.079
<v Speaker 1>pricing much wider than the sovereigns, you know, at least

0:13:33.320 --> 0:13:36.920
<v Speaker 1>compared to I remember in previous years. You know that

0:13:36.920 --> 0:13:39.960
<v Speaker 1>that is, it costs these companies much more to borrow

0:13:40.160 --> 0:13:43.280
<v Speaker 1>in the dollar markets than it costs the countries they

0:13:43.320 --> 0:13:46.400
<v Speaker 1>are in, even though they are stay owned and looked like,

0:13:46.880 --> 0:13:48.680
<v Speaker 1>you know, the same level of risk at least to me,

0:13:49.120 --> 0:13:51.560
<v Speaker 1>why is that what's going on there? Well, yeah, that's

0:13:51.559 --> 0:13:55.000
<v Speaker 1>a that's a really interesting situation. And again, even though

0:13:55.000 --> 0:13:58.480
<v Speaker 1>we're talking about one region, each country is an enterviewer

0:13:58.840 --> 0:14:03.439
<v Speaker 1>onto itself. So what you just said certainly applies very

0:14:03.520 --> 0:14:07.880
<v Speaker 1>much to to PEMICS in Mexico. Um. But when when

0:14:07.880 --> 0:14:11.520
<v Speaker 1>you consider that MX is really the only one percent

0:14:11.640 --> 0:14:17.319
<v Speaker 1>owned by the government company that's owned by the government. Um, yes, certainly,

0:14:17.360 --> 0:14:19.720
<v Speaker 1>when when you look at the others, there is significant

0:14:20.000 --> 0:14:23.160
<v Speaker 1>government influence and ownership, but Pemex is the only one

0:14:23.160 --> 0:14:25.920
<v Speaker 1>that's one hundred percent owned by the government. Investments investment

0:14:25.960 --> 0:14:30.680
<v Speaker 1>grade rating indeed is based on the likelihood of what

0:14:30.760 --> 0:14:34.160
<v Speaker 1>they referred to as extraory support from the government. UM.

0:14:34.200 --> 0:14:39.160
<v Speaker 1>So to me, yes, you know, your PEMICS is certainly

0:14:39.200 --> 0:14:41.400
<v Speaker 1>the most leverage of all these companies and perhaps you

0:14:41.440 --> 0:14:45.520
<v Speaker 1>know the most leverage uh uh company and energy company

0:14:45.560 --> 0:14:49.480
<v Speaker 1>in the world, certainly the most indebted. Um that that

0:14:49.600 --> 0:14:53.640
<v Speaker 1>price gap can be quite surprising. Um, you know, it's

0:14:53.880 --> 0:14:56.200
<v Speaker 1>a lot of a lot of that movements between the

0:14:57.320 --> 0:15:02.760
<v Speaker 1>sovereign and the corporate yields has really depended to a

0:15:02.760 --> 0:15:05.520
<v Speaker 1>significant extent upon the rhetoric that we hear coming from

0:15:05.560 --> 0:15:11.520
<v Speaker 1>the Mexican government. Um, whenever they announced that they will

0:15:11.560 --> 0:15:15.680
<v Speaker 1>be supporting all plans to supports the company specifically, that is,

0:15:15.720 --> 0:15:19.280
<v Speaker 1>they are BULLI for X amount in terms of equity

0:15:19.440 --> 0:15:21.640
<v Speaker 1>or they're going to use their taxes by y amount.

0:15:22.200 --> 0:15:25.680
<v Speaker 1>You see that spread narrow. So it's a kind of

0:15:25.680 --> 0:15:28.000
<v Speaker 1>a temporary thing. It's not really a long term phenomenal

0:15:28.240 --> 0:15:30.800
<v Speaker 1>or a trade that people should be jumping into. Well

0:15:30.840 --> 0:15:36.400
<v Speaker 1>I think, I think um, if if Mexico steps forward

0:15:36.600 --> 0:15:40.240
<v Speaker 1>with something specific in terms of an equity infusion, um,

0:15:40.240 --> 0:15:43.520
<v Speaker 1>you will see you should see that spread narrow significantly.

0:15:43.920 --> 0:15:46.800
<v Speaker 1>But again, as I said, uh, you know, getting back

0:15:46.800 --> 0:15:49.920
<v Speaker 1>to to to the pretext of your questions, UM, it

0:15:50.480 --> 0:15:52.960
<v Speaker 1>not all of not all of these companies have a

0:15:52.960 --> 0:15:57.600
<v Speaker 1>wide gap between the sovereign and the and the corporate.

0:15:57.640 --> 0:16:01.600
<v Speaker 1>In fact, in Argentina's case, the s in trade significantly

0:16:01.600 --> 0:16:05.040
<v Speaker 1>wider than the corporate, primarily because if the corporates are

0:16:06.760 --> 0:16:10.240
<v Speaker 1>big export earners. Interesting, okay, so they have hard currency

0:16:10.280 --> 0:16:13.360
<v Speaker 1>coming in. On the funding side, do we expect Latin

0:16:13.400 --> 0:16:17.040
<v Speaker 1>American oil and gas to be big issuers of debt

0:16:17.120 --> 0:16:23.200
<v Speaker 1>this year? I think if you do see significant issuance,

0:16:23.200 --> 0:16:25.400
<v Speaker 1>it may be from Eco Control. With the with the

0:16:25.480 --> 0:16:30.480
<v Speaker 1>changing government under the Petro administration and the move to

0:16:30.600 --> 0:16:35.960
<v Speaker 1>transition the company to clean your energy, all of that

0:16:36.240 --> 0:16:38.920
<v Speaker 1>rule spending is going to have to be funded somehow,

0:16:40.320 --> 0:16:44.840
<v Speaker 1>so I think you may see more from ECCO Control

0:16:44.920 --> 0:16:48.360
<v Speaker 1>perhaps than you will from Petro Brack. In Petro Bro's case. Again,

0:16:48.440 --> 0:16:51.000
<v Speaker 1>we're not quite sure how the Lula administration wants to

0:16:51.040 --> 0:16:55.040
<v Speaker 1>play with the refining situation. But if they do decide

0:16:55.040 --> 0:16:59.720
<v Speaker 1>to construct refineries or increase the refining spacity, you may

0:16:59.760 --> 0:17:02.680
<v Speaker 1>see from there, um you are not good to see.

0:17:02.720 --> 0:17:05.400
<v Speaker 1>I don't think much out of Argentina only because there

0:17:05.520 --> 0:17:09.000
<v Speaker 1>is such a limited access to the market. Okay, interesting,

0:17:09.080 --> 0:17:15.040
<v Speaker 1>So just switching slightly to another related topic, esg um.

0:17:15.080 --> 0:17:18.200
<v Speaker 1>You know it's such a big deal for all markets

0:17:18.240 --> 0:17:22.360
<v Speaker 1>and credit in particular. But how are these companies transitioning

0:17:22.560 --> 0:17:28.399
<v Speaker 1>away from fossil fuels into green and clean fuels. Well,

0:17:28.480 --> 0:17:30.920
<v Speaker 1>I think I think Eco patrol is probably the one

0:17:30.920 --> 0:17:34.280
<v Speaker 1>that comes first to mind. Um. Just given as I

0:17:34.359 --> 0:17:38.600
<v Speaker 1>mentioned the transition um to cleaner edgy that the new

0:17:38.640 --> 0:17:42.200
<v Speaker 1>administration wants to push through, we haven't seen as much.

0:17:42.560 --> 0:17:44.639
<v Speaker 1>Perhaps we've seen something from from Brazil, but not so

0:17:44.720 --> 0:17:48.200
<v Speaker 1>much from Mexico or Argentina. Um. But at the other

0:17:48.280 --> 0:17:50.440
<v Speaker 1>end the spectrum, you know, I think I think we

0:17:50.480 --> 0:17:54.399
<v Speaker 1>should really talk about Eddi vessa Um, which you know

0:17:54.480 --> 0:17:58.199
<v Speaker 1>has heaviest oil um again to what we see in

0:17:58.280 --> 0:18:02.440
<v Speaker 1>the oil fans, but all so the diarliest fuel so um.

0:18:03.200 --> 0:18:07.840
<v Speaker 1>If if sanctions are lifted or eased for Peti Vester

0:18:07.960 --> 0:18:11.320
<v Speaker 1>and we see their production moving up, I think that

0:18:11.480 --> 0:18:15.560
<v Speaker 1>may become a central point for ESG in Latin America.

0:18:15.960 --> 0:18:18.199
<v Speaker 1>Interesting on sanctions, I mean you kind of raise the

0:18:18.200 --> 0:18:20.840
<v Speaker 1>issue of political risk, which is so key to a

0:18:20.840 --> 0:18:24.040
<v Speaker 1>lot of these companies. I mean, I remember the Petrobras

0:18:24.480 --> 0:18:28.760
<v Speaker 1>car wash scandal, which brought down several presidents and other

0:18:28.800 --> 0:18:31.800
<v Speaker 1>executives um and really slammed the price of all the

0:18:31.840 --> 0:18:37.080
<v Speaker 1>securities and tipped that company into distress. What's what's the

0:18:37.080 --> 0:18:39.720
<v Speaker 1>regional outlook? We are we are much more in a

0:18:39.800 --> 0:18:41.919
<v Speaker 1>much more stable that in America than previously or is

0:18:41.920 --> 0:18:45.560
<v Speaker 1>it still as rocky as ever? Well, I certainly we've

0:18:45.560 --> 0:18:48.080
<v Speaker 1>seen a degree with earlier. We just saw two changes

0:18:48.080 --> 0:18:51.840
<v Speaker 1>of administration, one in Brazil UM and one in Columbia UM.

0:18:52.440 --> 0:18:57.600
<v Speaker 1>Their policies UM will will perhaps affect the earliest capability

0:18:57.640 --> 0:19:00.119
<v Speaker 1>of these companies, but I don't think you're going back

0:19:00.320 --> 0:19:03.040
<v Speaker 1>as far as you know to anything like the car

0:19:03.240 --> 0:19:07.600
<v Speaker 1>scanels occurring UM. If anything, there might be some positive

0:19:07.640 --> 0:19:10.720
<v Speaker 1>movements when we look at Venezuela and Pedavesto, even though

0:19:11.160 --> 0:19:14.760
<v Speaker 1>you may not have a regime change, greater corporation UM

0:19:15.000 --> 0:19:18.639
<v Speaker 1>and and and dialogue with the US may open open

0:19:18.680 --> 0:19:22.360
<v Speaker 1>that region up UM. Where Argentine is concerned, it's much

0:19:22.440 --> 0:19:26.280
<v Speaker 1>more an economic case. They have very strict capital controls

0:19:26.920 --> 0:19:30.520
<v Speaker 1>UM and. Even though these companies white DF and companies

0:19:30.560 --> 0:19:34.439
<v Speaker 1>here are very profitable, the concern we have there is

0:19:34.480 --> 0:19:36.639
<v Speaker 1>their ability to repay debt as it comes to you,

0:19:36.800 --> 0:19:40.240
<v Speaker 1>particularly for white white DF in twenty twenty three, and

0:19:40.320 --> 0:19:44.080
<v Speaker 1>their access to dollars to do that, which interestingly UM

0:19:44.200 --> 0:19:50.639
<v Speaker 1>you know, makes the Argentinean government's recent buy back of

0:19:51.080 --> 0:19:55.080
<v Speaker 1>dollars debt very interesting because they could use those funds

0:19:55.119 --> 0:19:58.520
<v Speaker 1>perhaps to be some power controls. Do we think generally

0:19:58.600 --> 0:20:01.840
<v Speaker 1>that um political risk is it's priced into Latin American

0:20:02.080 --> 0:20:05.040
<v Speaker 1>markets on the on the credit side, I think so.

0:20:05.280 --> 0:20:08.399
<v Speaker 1>I think so because you know, really depends upon the

0:20:08.440 --> 0:20:12.320
<v Speaker 1>spread that you see between the sovereign and the corporate

0:20:12.920 --> 0:20:19.360
<v Speaker 1>and you know, earnings and inefficiency and death maturities aside

0:20:19.359 --> 0:20:22.639
<v Speaker 1>which you see primary x UM. I think it's pretty

0:20:22.760 --> 0:20:26.080
<v Speaker 1>pretty well priced for ECCO control in Colombia and Brazil

0:20:26.200 --> 0:20:29.040
<v Speaker 1>and fraud. Okay, let's hope you're right. We'll definitely read

0:20:29.080 --> 0:20:31.600
<v Speaker 1>your analysis with great interests as we go through this. Uh,

0:20:32.400 --> 0:20:35.639
<v Speaker 1>it's always it's always an interesting time for for Latam.

0:20:35.640 --> 0:20:39.360
<v Speaker 1>Thanks very much, Jamon Patel from Bloomberg Intelligence. You can

0:20:39.359 --> 0:20:41.879
<v Speaker 1>read all of his analysis on the Bloomberg Terminal, and

0:20:42.000 --> 0:20:45.439
<v Speaker 1>thanks also to Paula Selexon from Bloomberg News. Read all

0:20:45.480 --> 0:20:48.760
<v Speaker 1>her scoops on the terminal and at Bloomberg dot Com.

0:20:48.800 --> 0:20:51.560
<v Speaker 1>I'm James Crumbie. It's been a pleasure having you. See

0:20:51.560 --> 0:21:07.800
<v Speaker 1>you next week on the credit edge