(Bloomberg) — State-owned companies across Latin America face falling output, cash woes and expensive investment plans. Yet bondholders can’t get enough.
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Companies such as Petroleos Mexicanos SA, Petroleos de Peru SA and Chile’s Codelco are luring investors by offering much higher yields than debt from their respective governments for what is proving essentially the same risk. The argument, it goes, is if the sovereign is doing well, it won’t let the company go under.
“The government won’t want to make a political crisis. Nobody is interested in that,” said Peter Varga, a senior portfolio manager at Erste Asset Management GmbH. “It’s cheaper to kick down the can on the road, so they’ll always help a bit just to avoid default.”
Betting on their bonds has paid off. Debt from Pemex, PetroPeru and Codelco beat the average 5.7% return for a Bloomberg index of emerging-market credits in the last…
