Chile junk bonds surge

Bloomberg

Bond investors are giving Chile’s Masisa SA a vote of confidence as the wood-panel maker unloads assets, pays debt and becomes less reliant on Venezuela.
Its $200 million of notes due in 2019 have returned 27 percent in 2016, almost twice the average for emerging-market corporate debt. The junk-rated securities sank to a record low last year on concern the company would struggle to its pay debts as economies from Brazil to Argentina slumped.
Masisa, whose products are used to make furniture, has won back investors after raising $121 million from asset sales and paying back $100 million of its bonds. The company also now only gets 3 percent of its revenue and 6 percent of its earnings before items from Venezuela, a country reeling from an imploding economy, soaring inflation and dwindling hard currency. In 2014, Masisa generated almost a quarter of its sales and about 30 percent of Ebitda in Venezuela. Chile, Brazil and Mexico are now the company’s biggest markets.
Gimme Credit and Fynsa International say there are more bond gains to be had as Masisa may look to carry out a bond swap to further bolster its finances.
Such a move would “extend maturities and improve conditions,” said Jaime Achondo, a head trader at Fynsa.
Masisa attributes the performance of its bonds to improved investor sentiment as it has operations in countries in which economic prospects are significantly improving such as Brazil and Argentina, and the recent opening of a new plant in Mexico, as well as efforts to cut down debt, Chief Financial Officer Eugenio Arteaga said in an interview.
“This should all lead to much better results by 2018 and allow us to obtain better terms if we decide to visit the bond market or secure a bank loan to meet our 2019 obligations,” Arteaga said.