Senior Credit Analyst - Emerging Markets, EM Spreads

Leandro Gubler

Senior Credit Analyst - Emerging Markets

EM Spreads

Credit

Braskem is a global petrochemical company specializing in the production and sale of thermoplastic resins, including polyethylene, polypropylene, and PVC, as well as basic petrochemicals and fuels. Its products serve various industries such as packaging, automotive, construction, and consumer goods. The company is headquartered in São Paulo, Brazil, and was founded in August 2002.

<ul>
<li>Underweight from Neutral on valuation: Principal impairment and creditor-funded, potentially secured new money are now on the table, yet the 2028–2041 curve still averages $54.7, leaving limited recovery cushion.</li>
<li>Proposal cuts debt, but not enough: At 50-cent buybacks, debt-funded US$2.0bn new money nets only ~US$0.5bn gross reduction versus our US$4–5bn need; a group of bondholders demands US$3.0bn shareholder equity.</li>
<li>Rotate from the belly into the 2050s: At $43.3, ~15 points below the 2031s, they cushion better if consideration converges; Neutral, though preserved coupons and maturities would reverse the edge.</li>
</ul>


Underweight from Neutral on valuation: Principal impairment and creditor-funded, potentially secured new money are now on the table, yet the 2028–2041 curve still averages $54.7, leaving limited recovery cushion.
Proposal cuts debt, but not enough: At 50-cent buybacks, debt-funded US$2.0bn new money nets only ~US$0.5bn gross reduction versus our US$4–5bn need; a group of bondholders demands US$3.0bn shareholder equity.
Rotate from the belly into the 2050s: At $43.3, ~15 points below the 2031s, they cushion better if consideration converges; Neutral, though preserved coupons and maturities would reverse the edge.


Braskem: A Haircut Enters the Talks, but the Cash Is Still Missing

iShares MSCI Brazil Small-Cap ETF is an exchange-traded fund incorporated in the USA. The ETF seeks to track the performance of the MSCI Brazil Small Cap Index Fund.

<ul>
<li>Neutral from Underweight: Flávio Bolsonaro's first-round lead and PL's gains in Congress remove most event risk, but we think markets are pricing consolidation before any fiscal framework exists.</li>
<li>Fiscal arithmetic unchanged: Gross debt rises to 102.3% of GDP by 2028 on a near-zero primary balance; the 2027 budget stays with the outgoing Congress, delaying execution.</li>
<li>Valuation caps upside: Brazil 2035s offer 8 bps over Mexico 2034s after 28 bps of compression in three weeks; we stay defensive and favor switching out of the 2041s.</li>
</ul>


Neutral from Underweight: Flávio Bolsonaro's first-round lead and PL's gains in Congress remove most event risk, but we think markets are pricing consolidation before any fiscal framework exists.
Fiscal arithmetic unchanged: Gross debt rises to 102.3% of GDP by 2028 on a near-zero primary balance; the 2027 budget stays with the outgoing Congress, delaying execution.
Valuation caps upside: Brazil 2035s offer 8 bps over Mexico 2034s after 28 bps of compression in three weeks; we stay defensive and favor switching out of the 2041s.


Brazil Sovereign Debt: The Ballot Moved, the Budget Has Not

Petroleos Mexicanos operates as an oil and gas exploration and production services. The Company offers pipeline carriage, petrochemical distributor and shipping centers, logistics, and fuel commercialization services. Petroleos Mexicanos serves customers in Mexico.

<ul>
<li>We maintain Overweight with lower conviction, preferring the 7.690% 2050s for new money and the 6.625% 2035s for lower-duration accounts.</li>
<li>The 69% cut in 2027 federal transfers reflects a lighter maturity burden from liability management, not stronger standalone cash generation or weaker sovereign support.</li>
<li>Front-End refinancing gains are largely priced in; relative value has shifted long, where the 2050s offer superior spread-per-duration compensation but greater downgrade and supply sensitivity. </li>
</ul>


We maintain Overweight with lower conviction, preferring the 7.690% 2050s for new money and the 6.625% 2035s for lower-duration accounts.
The 69% cut in 2027 federal transfers reflects a lighter maturity burden from liability management, not stronger standalone cash generation or weaker sovereign support.
Front-End refinancing gains are largely priced in; relative value has shifted long, where the 2050s offer superior spread-per-duration compensation but greater downgrade and supply sensitivity. 


Pemex: Lower 2027 Transfer Reflects Refinancing Progress

MercadoLibre, Inc. operates an online trading site for the Latin American markets. The Company's website allows businesses and individuals to list items, conduct sales, and purchases online in either a fixed-price and auction format. MercadoLibre offers classified advertisements for motor vehicles, vessels, aircraft, and real estate, as well as online payment services.

<ul>
<li>MercadoLibre priced US$1.0bn 5.850% 2036s at 6.139%; we remain Neutral, rate the new bond Hold, and continue to prefer the lower-duration 2031s.</li>
<li>The deal lifts pro forma liquidity coverage to ~1.10x, but total debt rises to US$14.18bn, gross leverage to ~3.64x, and annual coupon expense by US$58.5mn. </li>
<li>The 2036s offered no obvious new-issue concession and sit broadly in line with long-dated LatAm IG peers, leaving limited valuation cushion against funding-intensive Fintech growth. </li>
</ul>


MercadoLibre priced US$1.0bn 5.850% 2036s at 6.139%; we remain Neutral, rate the new bond Hold, and continue to prefer the lower-duration 2031s.
The deal lifts pro forma liquidity coverage to ~1.10x, but total debt rises to US$14.18bn, gross leverage to ~3.64x, and annual coupon expense by US$58.5mn. 
The 2036s offered no obvious new-issue concession and sit broadly in line with long-dated LatAm IG peers, leaving limited valuation cushion against funding-intensive Fintech growth. 


MercadoLibre Prices US$1.0bn 5.850% 2036 Senior Unsecured Notes

YPF Sociedad Anonima is involved in the exploration, development and production of crude oil, natural gas and liquefied petroleum gas. The Company also refines, markets, and distributes oil alongside its derivatives YPF generates nearly all of its revenue inside Argentina, and has headquarters in Buenos Aires, Argentina.

<ul>
<li>Refinancing risk falls: YPF’s enlarged US$1.0bn tender can retire all targeted 2027s and roughly half the 2029s, materially reducing near-term maturities.</li>
<li>Credit impact stays manageable: The transaction adds only modest leverage, while improved market access and a cleaner maturity profile strengthen liquidity ahead of the 2027 election.</li>
<li>Value is selective: We remain Neutral on YPF as curve dislocations create bond-specific opportunity, but not enough broad valuation support to justify an issuer-level upgrade.</li>
</ul>


Refinancing risk falls: YPF’s enlarged US$1.0bn tender can retire all targeted 2027s and roughly half the 2029s, materially reducing near-term maturities.
Credit impact stays manageable: The transaction adds only modest leverage, while improved market access and a cleaner maturity profile strengthen liquidity ahead of the 2027 election.
Value is selective: We remain Neutral on YPF as curve dislocations create bond-specific opportunity, but not enough broad valuation support to justify an issuer-level upgrade.


YPF Prices US$1.2bn 7.550% 2035s and Doubles Tender Cap to US$1.0bn