EM Spreads: Market Commentary and News

Vista Acquires Equinor’s Vaca Muerta Assets, Reinforcing Core Acreage Position

EM Spreads — Tue, 03 Feb 2026 22:20:47 GMT

Vista Energy announced an agreement to acquire Equinor’s onshore unconventional assets in Argentina’s Vaca Muerta basin, marking another step in the company’s strategy to consolidate scale in the core of the shale play. The transaction involves the acquisition of non-operating working interests in two producing blocks, Bandurria Sur and Bajo del Toro, both operated by YPF. Vista will acquire a 25.1% interest in Bandurria Sur and a 35.0% interest in Bajo del Toro, while YPF will remain operator of both assets. Following completion, YPF will hold a 44.9% interest in Bandurria Sur and a 65.0% interest in Bajo del Toro, with Shell Argentina retaining a 30.0% stake in Bandurria Sur. The acquisition is subject to customary conditions precedent, including regulatory approvals and the waiver or non-exercise of pre-emptive rights held by partners. YPF has already signed a waiver of its pre-emptive rights, subject to Shell Argentina’s decision regarding its own rights. Closing is expected in 2Q26.

The transaction value is framed differently by the parties. Equinor disclosed a headline value of approximately $1.1 billion, which includes upfront consideration, Vista equity, and contingent payments linked to production and oil prices over a five-year period. Vista, in turn, reported a transaction value of $712 million, which excludes contingent payments and the value of interests sold to YPF as part of the broader restructuring, thereby explaining most of the difference versus Equinor’s headline valuation.

Upfront consideration consists of $387 million in cash.
6.2 million Vista ADSs, valued at US$52.2 per share based on a 20-day volume-weighted average price.
A contingent consideration mechanism payable in five annual installments, calculated based on the acquired assets’ annual working interest production and the prior year’s average Brent price. No payment is due if Brent is at or below $65 per barrel, with payments capped at $15 per barrel at or above $80 per barrel.

To fund the transaction, Vista expects to use a combination of cash on hand and new bank financing. The company indicated that it has secured commitments for a new four-year loan facility of up to $600 million from a consortium of international banks, with the final amount to be determined at closing.

The assets are located in the core of Vaca Muerta and are adjacent to Vista’s existing operations, which management views as supportive of operational synergies and improved development efficiency. Upon closing, Vista expects to add approximately 22,000 boe/d of production, increasing total output by around 17% to roughly 150,000 boe/d. The transaction also adds an estimated 54 million boe of proved reserves and approximately 27,730 net acres in what Vista describes as the epicenter of the basin, together with a sizable inventory of ready-to-drill wells. Bandurria Sur is a mature unconventional concession awarded in 2015 with a 35-year term, while Bajo del Toro and Bajo del Toro Norte were awarded in 2021, also with 35-year terms.

According to company disclosures, the acquired assets generated $292 million of revenues over 9M25, of which $283 million were oil-related, implying a highly oil-weighted cash flow profile. On an annualized basis, revenues reach approximately $391 million, supporting adjusted EBITDA of $269 million. Cost metrics are competitive by Vaca Muerta standards, with lifting costs of $4.7/boe and selling expenses of $4.4/boe, underscoring the low-cost nature of the production base. Notably, approximately 64% of oil production is exported, reinforcing hard-currency cash generation and aligning the asset profile with Argentina’s broader export-driven shale strategy.

Recommendation and credit view

CSN: S&P Downgrade Reinforces Execution Risk, Thesis Persists

EM Spreads — Thu, 29 Jan 2026 14:45:57 GMT

Following our recent note on CSN’s announced divestment strategy, S&P Global Ratings downgraded the company to B+ with a Negative outlook, citing uncertainty around the execution, timing, and cash flow impact of the planned asset sales. While we agree that execution risk remains central to the credit story, we think the downgrade also highlights a broader tension between rating agency methodology and the directional improvement implied by a deleveraging plan of this magnitude.

S&P’s rationale is anchored in the conditional nature of CSN’s leverage reduction. The agency assumes that, absent completed divestments, leverage remains above 5.0x through 2026 and therefore treats the announced R$16–18bn asset sale program as largely neutral until proceeds are realized. From a methodological standpoint, this approach may be internally consistent, but it is inherently backward looking at a moment of strategic inflection. From a bondholder perspective, however, it arguably underweights the more relevant question, which is whether the plan improves the probability of deleveraging within a timeframe that matters for creditors, even if the path remains execution dependent.

Simpar and Subsidiaries Deliver Solid 4Q25 Preliminary Results

EM Spreads — Wed, 21 Jan 2026 20:10:09 GMT

We maintain our initiation framework that asymmetric risk favors operating-company bonds over the holding company, even as 4Q25 preliminary results improve the group’s credit optics. The deleveraging to 3.1x and the completion of the Ciclus Rio sale are credit positive and reduce near-term downside risk, but they do not change the structural reality that SIMHBZ 2031 remains structurally subordinated and reliant on upstreaming after subsidiaries meet their own debt service and liquidity needs. That dependence on upstreaming and structurally path-dependent recoveries was a core reason we preferred Vamos over Simpar at initiation.

CSN Launches Divestment Plan to Reduce Debt by R$15–18 billion

EM Spreads — Thu, 15 Jan 2026 21:54:01 GMT

On January 15, 2026, CSN hosted its Strategic Plan update call, during which it announced that its Board of Directors authorized a structured divestment plan aimed at reducing the group’s gross debt by R$15 billion to R$18 billion. The company intends to sell a controlling stake in its cement subsidiary, CSN Cimentos, and a relevant minority stake in its infrastructure division, CSN Infraestrutura. Management indicated that the sales process begins immediately, stating “we’re beginning this project today,” with the signing of definitive agreements expected between the third and fourth quarters of 2026.

Chairman Benjamin Steinbruch framed the decision as a response to Brazil’s high interest rate environment, describing rates as “stratospheric” and noting that the targeted deleveraging amount represents roughly 50% of the company’s current debt. Management emphasized that waiting for a more benign rate cycle would continue to weigh on cash flow and pressure the capital structure, reinforcing the need to pursue balance sheet action despite challenging market conditions for asset valuations.

Braskem Coupon Payment Alleviates Immediate Default Risk

EM Spreads — Wed, 14 Jan 2026 18:56:27 GMT

We maintain our view that Braskem’s large domestic footprint, political relevance, and partial government ownership make a default event less likely in the near term. That said, we think the timing of liquidity measures and clarity on policy relief will be decisive for any sustained re-pricing. At current spread levels, we view most of the downside as already reflected in prices, with Braskem bonds trading in the $36–44 range, improving from the $31–39 range in mid-October 2025. In this context, we favor exposure to the lower-priced bonds within the curve, where investors have better protection against potential haircuts.

Pemex: Debt Strategy Extends Support, Spreads Tighten vs Mexico

EM Spreads — Wed, 01 Oct 2025 00:12:09 GMT

At current spread levels and with a steeper curve, we continue to recommend the PEMEX 6.700% 2032s, yielding 6.9% with a 4.4-year duration, as we see more value in the belly of the curve. For investors with higher duration appetite, we find the PEMEX 7.690% 2050s, yielding 8.6% with a 10.2-year duration, the most attractive on the long end, as they offer compelling carry and, at $90.9, provide further upside potential.

Mexico’s recent actions represent an extraordinary demonstration of support, effectively transferring Pemex’s refinancing burden onto the sovereign balance sheet. For credit markets, this justifies Pemex’s tighter 10Y spreads versus the sovereign and explains the sharp compression in the Pemex–Mexico spread. Since the July 22, 2025 announcement, Pemex’s 10Y spread has tightened by 136 bps to 355 bps, 80 bps below the 3-month average of 435 bps and 169 bps below the one-year average of 524 bps. As we have highlighted previously, spread compression in Pemex tends to follow tangible credit-positive measures, such as the government issuing debt to directly support the company.

That said, we believe further tightening will hinge on Pemex’s fundamentals, particularly improvements in oil production and cash generation. While government measures anchor near-term performance, investors are likely to increasingly focus on Pemex’s operational profile. We continue to see structural weaknesses, including declining upstream production and an unprofitable downstream segment, which significantly constrain cash generation and leave the company reliant on sovereign support. Pemex bonds should remain well-supported in the near term, but execution risks and fragile fundamentals cap medium-term upside.

Weekly News & Views

EM Spreads — Sun, 14 Sep 2025 22:27:31 GMT

Market Snapshot

The LatAm Aggregate Index widened by 8 bps to 299 bps in the week ending Friday, September 12, 2025, and is now trading 8 bps below its 3-month average of 291 bps. The broader Emerging Market Index contracted 3 bps to 171 bps, 7 bps tighter than its 3-month average of 178 bps. Meanwhile, the U.S. Aggregate Index narrowed by 3 bps to 106 bps, 6 bps below its 1-year average of 112 bps.

Notably, the EM CCC Index widened by 117 bps to 898 bps and is now 200 bps above its 3-month average of 698 bps and 90 bps higher than its 1-year average of 808 bps. In contrast, the U.S. CCC Index contracted 11 bps to 624 bps, 25 bps tighter than its 3-month average of 649 bps. The EM CCC Index was primarily affected by the repricing of Argentine risk following the provincial elections.

Equity markets in the region posted mixed performance. Argentina’s Merval Index fell 19.6%, while Brazil’s Ibovespa increased 4.3% and Mexico’s Mexbol gained 6.2%. In the U.S., the S&P 500 Index rose 1.8% over the week.

In commodities, WTI crude closed at $62.7/b, down 2.0% on the week, while Brent settled at $67.0/b, up 0.2% over the same period.

Turning to bond yields, the 10-year U.S. Treasury yield contracted 22 bps to 4.06%, while the 5-year yield declined 18 bps to 3.63%. In Latin America, the 10-year Mexican government bond yield narrowed 26 bps to 5.61%, the Brazilian 10-year rose 18 bps to 6.11%, and Argentina’s 10-year jumped to 13.28% from 11.35%.

Weekly News

Argentina: Election Setback Highlights Elevated Political Risk

On September 7, 2025, President Javier Milei’s Libertad Avanza party suffered a heavy defeat in Buenos Aires provincial elections, losing to the Peronist opposition by nearly 14 points. The setback, coming a month ahead of congressional midterms, raised doubts about Milei’s political capacity to advance structural reforms. Axel Kicillof’s potential return to national politics also revives memories of his 2012 YPF expropriation, sovereign default, and currency controls. The loss underscores Milei’s weakened political capital heading into October’s midterms, where his ability to secure congressional support for fiscal and labor reforms will be tested. Investors are recalibrating expectations, with many viewing Kicillof’s rise as a signal that heightened political risk premia could persist.

We view Milei’s electoral defeat and the emergence of “Kicillof risk” as material headwinds for Argentine spreads in the near term, adding a premium to Argentine risk given heightened uncertainty around policy continuity, reform execution, and investor confidence. While the administration has delivered progress on disinflation and reserve accumulation, the political setback raises the risk of legislative gridlock and complicates Argentina’s ability to sustain reforms, particularly with $4 billion in maturities approaching in January 2026. The consolidation of Axel Kicillof’s leadership within Peronism further clouds the medium-term outlook, intensifying concerns about a potential populist resurgence in 2027.

As a result, markets reacted sharply on Monday. Argentina’s hard-currency bonds dropped up to 7 cents to around 55 cents on the dollar, pushing yields near 12.7% in the steepest decline in two years. The peso weakened to a new all-time low, sliding as much as 7% past ARS1,400 per USD, while the Merval equity index fell 13% in its worst single-day performance since 2020.

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Suzano Priced US$1bn 5.500% 2036 Unsecured Notes

On September 3, 2025, Suzano Netherlands B.V., guaranteed by Suzano S.A., priced US$1 billion senior unsecured notes due January 2036 at 98.714 to yield 5.667%, equivalent to T+145bps. This came tighter than the +150bps guidance and well inside the +180bps initial price talk. The coupon was set at 5.500%, with semiannual payments beginning January 15, 2026. The bonds are rated Baa3/BBB-/BBB-.

The notes are governed by New York law and feature a make-whole call at T+25bps plus accrued and unpaid interest until October 15, 2035, after which a par call applies. They also include an 85% clean-up call provision. Gross proceeds totaled US$987.1 million (before fees and expenses). Proceeds will be used to repurchase Suzano’s 2026 and 2027 notes pursuant to ongoing tender offers, followed by potential make-whole redemptions, subject to market conditions.

We think the transaction reinforces Suzano’s proactive liability management and supports its credit trajectory. Pricing well inside IPT highlights strong demand for Suzano paper and favorable market access, consistent with the issuer’s solid position within the LatAm BBB peer group. The new 2036s extend the maturity profile and facilitate refinancing of nearer-term debt without increasing overall leverage. We note that while Suzano has pursued strategic M&A recently, including the Kimberly-Clark tissue assets, management remains committed to deleveraging, which should help contain balance sheet risks.

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Pemex: Bond Buyback Offer Highlights Sovereign Support and Debt Relief

On September 2, 2025, Pemex announced the launch of a buyback offer of up to US$9.9 billion across 11 bonds. The program targets front-end maturities, specifically USD-denominated bonds due 2026–2029 and EUR-denominated bonds due 2026–2028. A priority framework will govern acceptance of tenders, beginning with the 4.500% 2026s, followed by the EUR 3.750% 2026s and the USD 6.875% 2026s. The offer includes an Early Tender Premium of 30 per 1,000, with withdrawal and early tender deadlines set for September 15 and final expiration on September 30.

Pemex may exercise an Early Settlement Right after the Early Tender Date, subject to conditions. Consideration will be paid in cash plus accrued interest, with proration applied if tenders exceed the cap. The buyback follows Mexico’s recently announced sovereign-backed financing to support Pemex, including the July–August issuance of pre-capitalized securities and related treasury-collateralized funding, which authorities have signaled will help cover 2025–2026 maturities.

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YPF Advances LNG Push with New Partners Sought for $25bn Projects

YPF is in talks to add one or two new partners to its LNG ventures with Shell and Eni, CEO Horacio Marín confirmed at the Gastech conference in Milan. The projects, with an estimated cost of $25bn, aim to monetize Vaca Muerta shale gas with exports to Europe and Asia. YPF expects to complete technical studies by year-end, with Wison Group conducting engineering for Eni’s portion, and to secure financing starting in 2026. The company could hold a 25–30% equity stake, with the remainder funded through partners and a typical 70/30 debt–equity structure. First production is targeted for 2029–2030.

The LNG plan builds on YPF’s accelerated pivot to unconventional resources. The company has already divested 18 conventional blocks under its Mature Fields Exit Program, with two-thirds of its US$5bn 2025 capex directed toward shale. LNG exports would be a structural shift, moving Argentina from net importer to niche exporter, complementing recent upstream and midstream expansion.

MercadoLibre Fintech Momentum, CEO Transition, and New Growth Pilots

MercadoLibre CEO Marcos Galperin said at an event in Mexico City that Mercado Pago, the company’s fintech arm, is expanding faster than its core e-commerce business. Mexico country head David Geisen added that the local market is projected to grow 10% through year-end. Ariel Szarfsztejn, President of Commerce and incoming CEO from January, highlighted that AI developments are expected to reshape user interaction with the company’s platforms in as little as 2–3 years. Galperin stated he is handing over leadership at the “best moment” for the company as he moves into the chairman role.

Separately, CFO Martin de los Santos confirmed that MercadoLibre is testing pilot programs in pharma and food delivery. He said pharma is attractive given the high frequency of purchases despite its regulatory complexity, while food delivery could enhance ecosystem stickiness. These initiatives follow the company’s acquisition of a pharmacy in Brazil earlier this year, as reported locally.

Moody’s Upgrades Pemex to B1, Stable Outlook

On September 8, 2025, Moody’s Ratings upgraded Pemex’s Corporate Family Rating and senior unsecured ratings to B1 from B3, while affirming its Baseline Credit Assessment (BCA) at ca. The outlook was revised to Stable from “under review for upgrade.” Moody’s cited the Mexican government’s stronger commitment to supporting Pemex through its Strategic Plan 2025–2035, which includes equity-like contributions via the $12 billion P-CAP structure, an Investment Fund for upstream capex and suppliers, and a $9.9 billion debt tender backed by sovereign issuance.

Despite the uplift, Moody’s noted that Pemex continues to face structural challenges, including negative free cash flow, declining production, weak refining economics, and large cash requirements estimated at $7 billion annually in 2026–27. Liquidity remains thin, with $5.1 billion in cash and limited revolver capacity against heavy short-term obligations. The B1 rating reflects six notches of uplift from government support, assuming Very High default correlation and Very High probability of state backing, while the company’s standalone credit remains distressed.

Mexico – S&P Affirms ‘BBB’/‘BBB+’, Stable Outlook On Policy Prudence And Solid External Position

On September 8, 2025, S&P affirmed Mexico’s long-term foreign currency rating at BBB and local currency at BBB+ with a stable outlook, citing prudent monetary policy, moderate fiscal deficits ahead, and a solid external position; short-term ratings remain A-2 and the T&C assessment at A. The committee expects pragmatic management of U.S.–Mexico disputes and views sovereign support for Pemex and CFE as “almost certain,” keeping both aligned with the sovereign despite weaker standalone profiles. S&P projects net general government debt around 50% of GDP and interest near 15% of revenues in 2025, with the deficit narrowing toward 4% of GDP as fiscal consolidation resumes.

The decision lands alongside Banxico’s 25 bp cut in August to 7.75%, which supports a measured easing cycle as inflation moderates. S&P’s rationale underscores Mexico’s access to deep local markets, with most debt fixed-rate and long-tenor, and notes policy uncertainties from institutional reforms and contingent liabilities at state-owned energy firms. The reaffirmation follows fresh sovereign-backed support channels for Pemex, including the $12 billion P-CAP structure, reinforcing the agency’s view of extraordinary support.

EM Spreads - Weekly News Sep 12

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Argentina: Election Setback Highlights Elevated Political Risk

EM Spreads — Thu, 11 Sep 2025 20:56:54 GMT

Morgan Stanley reversed its recent Overweight recommendation, moving to Neutral and citing elevated political risk following the defeat and a corruption scandal involving Milei’s sister. JPMorgan and Bank of America, however, reiterated their Overweight stance, arguing that Milei could recalibrate his political strategy and preserve reform momentum. Goldman Sachs noted that Argentina remains an institutional overweight among hedge funds, despite some trimming of exposure.

Pemex: Bond Buyback Offer Highlights Sovereign Support and Debt Relief

EM Spreads — Wed, 03 Sep 2025 19:35:17 GMT

Weekly News & Views

EM Spreads — Mon, 25 Aug 2025 04:53:12 GMT

Market Snapshot

The LatAm Aggregate Index widened by 8 bps to 280 bps in the week ending Friday, August 22, 2025, and is now trading 15 bps below its 3-month average of 295 bps. The broader Emerging Market Index expanded 3 bps to 170 bps, reflecting a 13 bps contraction from its 3-month average of 182 bps. Meanwhile, the U.S. Aggregate Index increased by 1 bps to 108 bps, 7 bps below its 3-month average of 116 bps. Notably, the EM CCC Index widened by 40 bps to 686 bps and is now 8 bps below its 3-month average of 677 bps, while the U.S. CCC Index contracted 2 bps to 642 bps, 27 bps tighter than its 3-month average of 669 bps.

Equity markets in the region posted mixed performance. Argentina’s Merval Index fell 3.8%, while Brazil’s Ibovespa increased 1.2% and Mexico’s Mexbol improved 1.6%. In the U.S., the S&P 500 Index gained 0.3% on the week.

In commodities, WTI crude closed at $63.7/b, up 1.4% on the week, while Brent settled at $67.7/b, up 2.9% over the same period.

Turning to bond yields, the 10-year U.S. Treasury yield contracted 6 bps to 4.25%, while the 5-year yield declined 8 bps to 3.76%. In Latin America, the 10-year Mexican government bond yield increased 2 bps to 5.90%, the Brazilian 10-year rose 6 bps to 6.40%, and Argentina’s 10-year jumped 25 bps to 11.66%.

EM Spreads - Weekly News & Views with 2Q25 Earnings Recap

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2Q25 Earnings Recap

Telecom 2Q25: Neutral Amid Uncertainties While Upside Remains Limited

On August 21, we published our report on Telecom 2Q25 results.

We maintain our Neutral recommendation on Telecom Argentina (B2/B-/B). The notes offer attractive yields, and we think Telecom’s strategy is well positioned to leverage its strong market presence, with leverage metrics appearing solid and expected to improve further as the Telefónica integration progresses. However, we think a better entry point may emerge once there is greater clarity on regulatory, acquisition, and political fronts, while the 2031 and 2033 notes trade above par at $105.9 and $104.6, respectively, limiting near-term upside.

Telecom Argentina reported below expectations 2Q25 results. Consolidated revenue increased 32.3% QoQ and 61.0% YoY to P$1,912 billion, modestly missing market expectations by 0.3%. The top-line performance was supported by higher ARPU across all business lines and the consolidation of Telefónica Móviles Argentina (TMA), which provided a meaningful boost to reported figures. Reported EBITDA reached P$528 billion in 2Q25, up 10.2% QoQ and 41.0% YoY, but came in 5.0% below consensus expectations. The EBITDA margin contracted 5.5 pp QoQ to 27.6% and 3.9 pp YoY. EBITDA growth reflected stronger revenues, though margins compressed as certain costs grew faster than revenues, particularly severance charges at TMA, as well as bad debt expenses, regulatory taxes and fees, commissions and advertising, and other operating expenses. Management highlighted that excluding TMA severance charges, the theoretical margin would have been around 31.6%.

Suzano 2Q25: Credit Resilient but Curve Positioning Shift

On August 19, we published our report on Suzano 2Q25 results.

We downgrade Suzano’s (Baa3/BBB-/BBB-) 2031s and 2032s to Neutral and upgrade the 2029s to Overweight, as these notes offer a comparable yield while meaningfully reducing duration risk. We continue to view Suzano’s business and financial risks positively, supported by expectations of healthier pulp prices, higher sales volumes, and lower costs with reduced reliance on third-party purchases. However, at current spread levels, we see limited further upside for the 2031 and 2032 bonds. Management’s focus on deleveraging, cost efficiency, and executing strategic initiatives should further reinforce the company’s credit profile.

Suzano delivered healthy results, with stronger volumes and positive net free cash flow, though limited by lower prices. The company reported revenues of R$13.30 billion, up 15.1% QoQ and 15.7% YoY, exceeding market expectations by 3.8%. Sequential revenue growth was primarily driven by a 21.0% increase in sales volumes to 3,680kt in 2Q25, supported by higher Pulp (up 23.3%) and Paper (up 5.4%) volumes. This was partially offset by a 4.9% decline in average prices to R$3,613/t, with Pulp down 3.1% and Paper down 3.0%. Compared to 2Q24, revenue growth was underpinned by a 27.9% increase in sales volumes, reflecting a 28.4% rise in Pulp and a 23.5% increase in Paper. The top line was also supported by the 8.6% appreciation of the USD against the BRL and the start-up of Suzano Packaging US operations, partially offset by a 13.3% decline in Pulp prices (USD: down 20.1%).

YPF 2Q25: Encouraging Strategic Progress Supports Overweight View

On August 15, we published our report on YPF 2Q25 results.

We maintain an Overweight view on YPF (B2/B-/CCC+), supported by mature field divestments, lower lifting costs, and a strategic focus on expanding unconventional production and midstream/export infrastructure. These initiatives, along with a more favorable macroeconomic backdrop, should strengthen the credit profile and support bond outperformance. Risks include the October 2025 midterm elections and the unresolved Petersen/Eton Park legal dispute. We favor the YPFDAR 9.500% 2031 notes (8.1% yield, 2.7-year duration) and the 9.000% 2029 notes (7.7% yield, 2.0-year duration) for their attractive yields and limited duration risk.

YPF reported weak operating results in 2Q25, though in line with expectations. Total production volumes declined 1.2% QoQ, primarily due to the continued divestment of mature fields, where hydrocarbon production fell 26% sequentially to 72 kboed, representing only 13% of total production in the quarter. Revenues increased 0.7% QoQ to $4.64 billion, exceeding market consensus by 8.5%, supported by strong seasonal sales of natural gas and fuels, as well as higher crude oil and agricultural exports. These gains were partly offset by lower seasonal gasoline demand and Brent-driven declines in refined product prices, particularly for local fuels. Despite the sequential revenue increase, adjusted EBITDA declined 9.7% QoQ to $1.12 billion in 2Q25, though it exceeded market consensus expectations by 1.1%. The adjusted EBITDA margin contracted 2.8 pp QoQ and 0.2 pp YoY to 24.2%. The sequential decline was mainly driven by Brent contraction impacting refined product prices, the exit from mature fields, and inventory valuation effects, partially offset by lower lifting costs from reduced exposure to mature fields. Upstream EBITDA improved 0.7% QoQ, while Downstream EBITDA decreased 13.1% QoQ. We note that excluding mature fields, 2Q25 adjusted EBITDA would have been $1.25 billion, representing an 11.3% increase compared to the reported figure including mature fields.

Minerva 2Q25: Strong Results and Deleveraging Support Overweight Call

On August 12, we published our report on Minerva 2Q25 results.

We maintain an Overweight on Minerva’s 2033 bonds, which offer a 6.7% yield for a 4.0-year duration, providing higher yield with less duration risk than the 2031 notes and fair relative value to benchmarks and comparable notes. The view is supported by favorable beef market conditions, the company’s ability to offset U.S. tariffs, its track record of deleveraging, and successful asset integration, which we expect will drive further spread compression over the next 9–12 months.

Minerva reported solid operating results in 2Q25, generating net revenues of R$13.20 billion, up 24.3% QoQ and 81.6% YoY, exceeding market expectations by 11.0%. Growth was driven by higher sales volumes and prices in both domestic and export markets, including R$3.01 billion in revenue and 119.1k tons in volumes from newly acquired assets. Average prices increased 0.8% QoQ and 28.9% YoY to R$29.0/kg, while total volumes rose 22.3% QoQ and 39.8% YoY to 507k tons. Adjusted EBITDA increased 35.3% QoQ and 74.9% YoY to R$1.30 billion, exceeding consensus expectations by 14.8%. The adjusted EBITDA margin expanded 76 bps sequentially to 9.4% but contracted 35 bps YoY. Sequential margin expansion was mainly driven by cost dilution from higher volumes and revenues as the new assets ramped up, along with a 225 bps reduction in operating expenses as a percentage of revenue to 10.1%. The YoY contraction reflected higher cattle prices in several regions, which outpaced the increase in average selling prices. Management expects further cost dilution and margin support through year-end as utilization rates at the new plants improve.

MELI 2Q25: Constructive on Growth Prospects, Limited Spread Compression

On August 10, we published our report on Mercado Libre 2Q25 results.

We maintain our Neutral recommendation on MELI’s 2031 bonds, as relative value comparisons place them close to fair value, albeit on the expensive side. While we remain constructive on MELI’s operating profile and growth prospects, we see limited potential for further spread compression over the next 9–12 months given persistent margin pressure from new marketing and shipping initiatives, higher debt, and a tighter liquidity profile.

MercadoLibre delivered strong topline growth in 2Q25, although EBITDA missed market expectations. Revenues increased 14.4% QoQ and 33.8% YoY (FX-neutral: up 53% YoY) to $6.79 billion, supported by a 14.5% QoQ and 20.6% YoY increase in gross merchandise volume (FX-neutral: up 37.2% YoY) and a 10.8% QoQ and 39.4% YoY increase in total payment volume (FX-neutral: up 60.9% YoY). Healthy growth across key markets drove revenues 3.1% above consensus, with Brazil up 12.7% QoQ and 24.7% YoY, Mexico up 23.2% QoQ and 25.4% YoY, and Argentina up 10.5% QoQ and 76.9% YoY. By segment, Commerce revenues grew 16.2% QoQ and 29.3% YoY to $3.84 billion, while Fintech revenues increased 12.1% QoQ and 40.3% YoY to $2.95 billion.

CSN 2Q25: Stable Credit Metrics and Attractive Carry Support Overweight

On August 6, we published our report on CSN 2Q25 results.

We maintain our Overweight recommendation, favoring the CSNBZ 4.625% 2031s (yielding 9.1%, priced at $80.0) and CSNBZ 5.875% 2032s (yielding 9.3%, priced at $83.3) for their attractive carry, potential price upside, and wide spreads versus the LatAm BB curve. We believe CSN’s credit metrics will remain broadly stable, while spread compression could be supported by Brazilian protectionist measures on steel imports, a possible recovery in steel prices from Chinese production cuts, asset sales, anticipated domestic rate cuts, and improving global trade sentiment.

CSN delivered positive 2Q25 operating results despite headwinds. The company reported consolidated revenues of R$10.69 billion, down 2.0% QoQ and 1.7% YoY, coming in 2.0% below market expectations. The sequential decline was primarily driven by lower iron ore prices, which offset operational improvements, while steel revenues were affected by CSN’s decision to prioritize margin over volume amid a surge in low-priced imports. Adjusted EBITDA totaled R$2.64 billion, up 5.3% QoQ but down 0.1% YoY, exceeding consensus expectations by 6.4%. The adjusted EBITDA margin expanded 1.7 pp QoQ and 0.4 pp YoY to 24.7%. In the steel segment, the EBITDA margin increased 2.8 pp QoQ and 5.0 pp YoY to 10.8%, despite lower steel sales and revenues, as the company targeted the domestic market with more resilient pricing and lower costs, offsetting the 11.4% QoQ and 9.7% YoY decline in shipments caused by import competition. In the mining segment, EBITDA was pressured by lower prices, higher sea freight costs, and increased third-party purchases, while improved iron ore production contributed to cost dilution, helping to reduce C1 costs.

Gerdau 2Q25: Credit Resilience Supported by US Exposure

On August 4, we published our report on Gerdau 2Q25 results.

We maintain our Neutral recommendation on Gerdau. While we continue to hold a constructive view of Gerdau’s credit profile, the outlook for its Brazilian operations remains challenged, and we see limited room for further spread compression at current levels. That said, we find the GGBRBZ 5.750% 2035 and 7.250% 2044 bonds more attractive across the curve, offering yields of 5.6% and 6.0%, respectively, and trading wide to the US BBB curve. For US investors, this presents a noteworthy yield pickup opportunity within the investment-grade space.

Gerdau’s 2Q25 results were once again driven by North America, while performance in Brazil remained under pressure. The company reported revenues of R$17.53 billion, up 0.9% QoQ and 5.5% YoY, broadly in line with consensus, exceeding expectations by 0.3%. The sequential improvement was supported by stronger performance in North America, where higher shipments and price adjustments offset weaker trends in Brazil and South America. On a YoY basis, revenue growth was driven by an 8.6% USD appreciation and a 4.1% increase in consolidated shipments, primarily from volume growth in North and South America. This helped mitigate ongoing pricing and import-related pressures in Brazil.

Pemex 2Q25: Strong Government Backing Anchors Credit

On July 31, we published our report on Pemex 2Q25 results.

We recommend a selective Overweight on Pemex’s curve, supported by strong government backing evidenced by the $12 billion issuance and openness to private-sector funding, which effectively improves liquidity, reduces interest expense, and diversifies funding sources.

Pemex reported mixed 2Q25 results. The company’s top line increased 3.8% QoQ but declined 15.6% YoY to $20.09 billion. The sequential improvement was primarily driven by an 11.2% increase in domestic revenues, while the YoY decline was marked by a 24.8% drop in export revenues. Pemex generated $3.90 billion in adjusted EBITDA, down 51.7% QoQ but up 22.3% YoY. The adjusted EBITDA margin contracted 12.0 pp QoQ but expanded 5.5 pp YoY to 19.4%. The sequential deterioration was mainly due to a 25.0% increase in cost of sales and an 18.6% rise in operating expenses. On a YoY basis, the margin expansion was supported by a 19.2% decrease in cost of sales, partially offset by a 12.1% increase in operating expenses. After seven consecutive quarters of sequential production declines, Pemex’s oil and condensate production averaged 1,621 kbpd in 2Q25 (excluding partners), up 1.6% QoQ but down 8.2% YoY. Including partners, total production reached 1,638 kbpd, reflecting a 1.1% QoQ increase and an 8.6% YoY decline.

Cemex 2Q25: Resilient Credit Navigates Soft Results, but Tight Spreads Limit Upside

On July 28, we published our report on Cemex 2Q25 results.

We maintain our Neutral recommendation on Cemex. While we continue to view Cemex as an attractive and resilient LatAm credit, we see limited room for further spread compression at current levels, given macro uncertainty and a lack of near-term catalysts.

Cemex reported somewhat expected weak 2Q25 results. Revenues totaled $4.13 billion, reflecting a 5.3% YoY decline (l-t-l: -4% YoY), missing consensus expectations by 1.8%. The topline contraction was primarily driven by lower revenues in Mexico (down 23.3%) and the US (down 6.2%), partially offset by improvements in Europe (up 7.3%) and the Middle East and Africa (up 38.0%). The company generated EBITDA of $823 million, down 10.8% YoY (l-t-l: -9%), broadly in line with consensus, missing by just 0.6%. The EBITDA margin contracted 1.2 pp YoY to 20.0%, reflecting the drag from Mexico and the US, where weaker volumes and FX headwinds diluted otherwise solid pricing and cost-efficiency efforts. Cemex reaffirmed its flat EBITDA guidance for 2025, supported by accelerated cost-efficiency measures. Its Project Cutting Edge program raised the 2025 EBITDA savings target to $200 million, up from the initial $150 million, and aims for a $400 million run rate by 2027.

Vista 2Q25: Results Reinforce Overweight, But Cash Burn and Liquidity Weaken Buffer

On July 14, we published our report on Vista 2Q25 results.

We maintain our Overweight recommendation on Vista Energy, with a preference for the 2033 notes, which offer a modestly higher yield despite lower duration risk.

Vista reported 2Q25 results marked by a strong operational ramp-up and the first quarter of consolidated results following the PEPASA acquisition. The company delivered adjusted EBITDA of $405 million, up 46.9% QoQ and 40.3% YoY, coming in 2.0% above consensus, supported by a 46% sequential increase in production to 118.0 Mboe/d. This reflected the inclusion of 50% of La Amarga Chica, which returned to 4Q24 production levels. Despite a 9.3% sequential decline in realized oil prices, adjusted EBITDA margin expanded 3.4 pp QoQ to 66.3%, driven by the elimination of trucking costs and continued operating efficiency. In 2Q25, 84% of domestic oil volumes were sold at export parity-linked prices, while the remaining 16% of total oil sales were exports. As a result, all of Vista’s oil volumes, both domestic and exported, were effectively sold at export parity pricing.

Weekly News

MercadoLibre Launches Credit Card in Argentina

MercadoLibre’s fintech unit Mercado Pago announced the launch of its first credit card in Argentina, backed by Mastercard. The card, available in both physical and virtual formats, will be gradually distributed via its app in the coming weeks. It carries no issuance or maintenance fees and offers up to three interest-free installments on purchases over P$30,000 made on MercadoLibre’s marketplace or at merchants using Mercado Pago’s QR system. According to company president Juan Martin de la Serna, the initiative builds on the strong growth of MercadoLibre’s credit portfolio and aims to expand financing access for users with limited or no credit history. The product is fully integrated with Mercado Pago’s digital account, enabling end-to-end management through the app.

EM Spreads’ take: We think the launch of a credit card in Argentina reinforces Mercado Pago’s strategy of deepening financial inclusion and expanding its consumer credit footprint in a market with limited access to traditional banking. The absence of fees and installment incentives could drive adoption, while digital account integration should support usage and data collection.

Fitch Affirms Minerva at BB; National Scale Upgraded to AAA(bra)

Fitch Ratings affirmed Minerva’s Long-Term Foreign and Local Currency IDRs at BB and maintained a Stable Outlook, while upgrading the National Scale rating to AAA(bra) from AA+(bra). The senior unsecured notes rating at Minerva Luxembourg S.A. was also affirmed at BB. The upgrade on the National Scale reflects Fitch’s view of Minerva’s enhanced scale and geographic diversification following the acquisition of Marfrig’s beef assets at YE24, which boosted capacity by 42%. Fitch projects EBITDA margins to remain above industry averages and expects positive FCF to support net leverage at around 3.0x YE25, down from gross leverage of 5.2x.

Fitch highlighted Minerva’s competitive positioning as Latin America’s largest beef exporter, operating 43 plants across Brazil, Argentina, Uruguay, Paraguay, Colombia, Chile, and Australia. Export volumes are forecast to increase to 1.9 billion metric tons in 2025 from 1.5 billion in 2024. While U.S. tariffs on Brazilian beef are seen as credit neutral, Fitch noted Minerva’s ability to mitigate risks through exports from other geographies. Liquidity is considered strong, with R$12.6 billion in cash against R$27.2 billion in debt as of June 2025. The rating agency projects EBITDA of R$4.9 billion and CFFO of R$1.2 billion in 2025, with positive FCF supported by modest capex (1.8% of revenues) and a minimum dividend payout policy.

Government’s PEMEX Support Credit Neutral for Mexican Banks

Fitch said PEMEX’s new financial plan is broadly credit neutral for Mexican commercial and development banks. The plan should reduce commercial bank exposure to the public sector via loan repayments, though sovereign and GRE exposures will remain significant, accounting for about 26% of total assets, or 2.8x CET1 at 1Q25. The measures include the creation of Eagle Funding, which issued US$12bn in P-Caps, and a new P$250bn PEMEX Investment Fund, financed by development and commercial banks through sovereign-guaranteed loans.

Commercial banks’ direct exposure to PEMEX remains low, but supplier financing could add to asset-quality pressures, with NPLs in this segment rising to 3.4% in June 2025 from 0.2% in March. Banks are unlikely to increase PEMEX exposure due to prudential lending standards and internal risk guidelines. Development banks, however, are expected to maintain and possibly increase participation, given their policy mandate and strong capital positions (Banobras 24.6%, Bancomext 17.3%, Nafin 18.1% capital ratios at 1Q25). Fitch also noted PEMEX’s rating was upgraded to BB from B+ after the USD12bn P-Cap issuance, with sovereign support viewed as neutral for Mexico’s BBB-/Stable rating.

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Weekly News & Views

EM Spreads — Sun, 20 Jul 2025 22:06:45 GMT

Market Snapshot

The LatAm Aggregate Index widened by 6 bps to 293 bps in the week ending Friday, July 18, 2025, and is now trading 21 bps below its 3-month average of 314 bps. The broader Emerging Market Index held relatively steady at 179 bps, reflecting a 19 bps contraction from its 3-month average of 197 bps. Meanwhile, the U.S. Aggregate Index tightened by 2 bps to 112 bps, 14 bps below its 3-month average of 126 bps. Notably, the EM CCC Index widened by 26 bps and is now 46 bps below its 3-month average of 726 bps, while the U.S. CCC Index rose 13 bps to 658 bps, 35 bps tighter than its 3-month average of 693 bps.

U.S. Tariff Escalation: Credit Implications for Brazilian Companies in Our Coverage

EM Spreads — Wed, 16 Jul 2025 13:24:05 GMT

The recent decision by the United States to raise reciprocal tariffs on all Brazilian imports to 50% from 10%, effective August 1, 2025, marks a material escalation in trade tensions and introduces downside risk for Brazilian exporters with significant exposure to the U.S. market. Brazil is currently the 15th largest trading partner of the U.S., with exports totaling $42.3 billion in 2024, according to Bloomberg.

Despite this, Brazil’s economy has relatively limited direct exposure to U.S. tariffs, reflecting its diversified export base and commodity-heavy trade profile. In 2024, 11.5% of Brazilian exports were directed to the United States, up modestly from 11.1% in 2023. Key exports to the U.S. include crude oil, aircraft, iron and steel products, and agricultural goods such as orange juice and beef. While industrial sectors like aerospace, auto parts, and steel maintain active trade flows with the U.S., most of Brazil’s external revenues are tied to Asia, particularly China, which absorbed 30.5% of the country’s total exports in 2024, including a substantial share of its commodity exports.

Weekly News & Views

EM Spreads — Sun, 22 Jun 2025 20:32:44 GMT

Market Snapshot

The LatAm Aggregate Index expanded by 5 bps to 308 bps in the week ending Friday, June 20, 2025, and is now trading 25 bps below its 3-month average of 333 bps. The broader Emerging Market Index remained stable at 191 bps, reflecting a 16 bps contraction from its 3-month average of 207 bps. Meanwhile, the U.S. Aggregate Index contracted by 2 bps to 120 bps and is now 16 bps below its 3-month average of 136 bps. Notably, the EM CCC Index expanded 23 bps and is now trading 92 bps below its 3-month average of 800 bps, while the US CCC Index contracted 27 bps and is now at 693 bps, which is 22 bps below its 3-month average of 715 bps.

Equity markets in the region posted negative performances. Argentina’s Merval Index fell 3.0%, Brazil’s Ibovespa Index decreased modestly by 0.1%, while Mexico’s Mexbol Index declined 2.0%. In the U.S., the S&P 500 Index fell 0.2% for the week.

In commodities, WTI crude oil traded at $73.8/b, up 1.2% on the week, while Brent crude settled at $77.0/b, up 3.7% over the same period.

Turning to bond yields, U.S. Treasuries saw declines across the curve. The 10-year yield decreased 2 bps to 4.38%, while the 5-year yield fell 4 bps to 3.96%. In Latin America, the yield on the 10-year Mexican government bond expanded 4 bps to 6.15%, the 10-year Brazilian government bond decreased 4 bps to 6.67%, while the 10-year Argentine government bond contracted 7 bps to 10.87%.

EM Spreads - Weekly News June 22

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Brazil Macro

After four consecutive years of GDP growth at or above 3%, Brazil’s economic expansion is expected to moderate as tight monetary policy and a potential slowdown in public spending take effect. GDP growth is projected at 2.2% in 2025, 1.6% in 2026, and 2.2% in 2027. Inflation closed 2024 at 4.4%, exceeding the 3% target band ceiling, as high interest rates have failed to bring it down. Managing inflation in 2025 will likely require a coordinated policy effort, with the 5.3% inflation forecast reflecting anticipated rate hikes and a smaller budget deficit. Inflation is expected to ease to 4.3% in 2026 and 3.8% in 2027. The Brazilian government has also struggled to reduce spending, which has contributed to higher borrowing costs amid already elevated public debt. In May, consumer prices remained high at 5.32% YoY, offering little relief to central bankers debating whether to pause the tightening cycle or deliver another interest rate hike.

Brazil’s unemployment rate is expected to increase after consistent labor market improvement since 2021, reaching 6.8% in 2024. However, ongoing monetary and fiscal tightening is likely to weigh on employment in the coming quarters, keeping the unemployment rate relatively stable in 2025 before rising to 7.2% in 2026 and 7.4% in 2027.

In 2024, the Brazilian real weakened to its lowest nominal level, while the fiscal deficit remained elevated at 8.5% of GDP. Although the currency is expected to stabilize in 2025, the fiscal deficit is projected to remain high at 8.4% in 2025 and 8.0% in 2026. On trade policy, Brazil maintains a trade deficit with the United States, making it unlikely to become a primary focus of the Trump administration. However, if U.S. tariffs were to exert pressure on Brazil, the country’s export sector, one of its key economic drivers, could be negatively affected. This would risk constraining economic growth.

Weekly News

Minerva Announces Divestment of Uruguayan Asset to Allana

On June 13, 2025, Minerva announced that its subsidiary, Athn Foods Holdings S.A., entered into an agreement to sell Establecimientos Colonia S.A., a Uruguayan company, to Allana Magellan S.L. for US$48 million.

The divestment follows the restructuring of the Uruguay Transaction originally announced in February 2025, in which Minerva agreed to acquire multiple assets from a Marfrig subsidiary. In accordance with antitrust guidance from Uruguay’s COPRODEC, Athn Foods will retain the Salto and San José plants, while the Colonia facility must be resold. The closing of the transaction remains subject to customary conditions, including COPRODEC’s final approval of the broader deal.

EM Spreads’ take: We view the announced divestment as credit neutral. The transaction had been largely anticipated. However, the sale removes uncertainty around COPRODEC’s final decision and mitigates the risk of fines or delays. The retained assets, Salto and San José, represent the strategic core of Minerva’s Uruguay footprint, providing scale, export diversification, and EBITDA contribution to Minerva. With the Uruguay integration already underway and synergy benefits from the Marfrig acquisition beginning to materialize, we continue to see value in Minerva’s credit.

YPF Advances Divestment Strategy to Prioritize Vaca Muerta Development

YPF is accelerating its divestment of conventional assets as it intensifies its strategic focus on shale oil development in the Vaca Muerta formation. As part of its Andes Project, the company approved the transfer of 12 additional blocks, including assets in Chubut and Mendoza, bringing the total number of divested areas to 18. Another 21 are in final stages, and 11 remain in progress. These moves align with YPF’s Mature Fields Exit Program, which targets the transfer of 50 conventional blocks.

This strategic pivot is central to the company’s “4x4 Plan,” which prioritizes capital allocation toward high-IRR unconventional assets and the buildout of midstream infrastructure. In 2025, YPF plans to allocate US$3.3 billion, roughly two-thirds of its US$5 billion capex budget, toward Vaca Muerta. In 1Q25, shale oil output reached 149 kbpd, and total oil production from the formation is on track to hit 200 kbpd by year-end.

EM Spreads’ Take: YPF’s asset sales reaffirm its focus on capital discipline and portfolio optimization. The strategy has begun to show tangible results: 1Q25 adjusted EBITDA rose 48% QoQ to $1.25 billion, driven by margin expansion, higher shale output, and cost savings from mature field divestments. Lifting costs fell 11.8% QoQ to $15.3/boe, while gross margin improved by 6.8pp.

Despite a 10% increase in net debt and continued negative free cash flow, we view the divestment program and investment in core shale infrastructure, including the Oldelval and VMOS pipelines, as credit positive. These steps, combined with LNG monetization plans and favorable tailwinds from Argentina’s macro stabilization and the Milei administration’s pro-business reforms (e.g., RIGI), support our constructive view on YPF’s credit trajectory.

CSN Cimentos Brasil Finalizes Terms of R$550 Million Debenture Offering

CSN Cimentos Brasil S.A., a subsidiary of Companhia Siderúrgica Nacional (CSN), has finalized the terms of its fourth public issuance of simple, non-convertible, unsecured debentures with additional surety guarantee. The offering, distributed under Brazil’s automatic registration process, was originally structured for up to R$600 million but was ultimately set at R$550 million, consisting of 550,000 debentures with a face value of R$1,000 each. The issuance date was June 17, 2025.

The transaction is governed by the private instrument of the 4th Debenture Indenture, signed on June 5, 2025, between CSN Cimentos Brasil, Vórtx Distribuidora de Títulos e Valores Mobiliários Ltda. as the trustee, and Elizabeth Cimentos S.A. as guarantor. Elizabeth Cimentos is currently in the early stages of operations and is not yet registered as a securities issuer with the CVM. The debentures are being offered under CVM’s automatic registration regime and are exclusively directed at professional investors. As such, the offer does not require a prospectus or summary document under CVM Resolution 160.

EM Spreads’ take: We view CSN Cimentos Brasil’s R$550 million debenture issuance as a credit-neutral event that reinforces the company's ability to access domestic capital markets under competitive terms. The use of an additional surety guarantee from Elizabeth Cimentos S.A., despite its early operational stage, likely served to enhance investor comfort and pricing efficiency. We will continue to monitor how proceeds are allocated and whether the company maintains a conservative financial policy amid ongoing market expansion.

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Weekly News & Views

EM Spreads — Mon, 16 Jun 2025 03:52:30 GMT

Market Snapshot

The LatAm Aggregate Index contracted by 3 bps to 303 bps in the week ending Friday, June 13, 2025, and is now trading 35 bps below its 3-month average of 338 bps. The broader Emerging Market Index expanded 3 bps to 191 bps, reflecting a 17 bps contraction from its 3-month average of 208 bps. Meanwhile, the U.S. Aggregate Index increased by 2 bps to 122 bps and is now 16 bps below its 3-month average of 138 bps. Notably, the EM CCC Index contracted 10 bps and is now trading 131 bps below its 3-month average of 817 bps, while the US CCC Index expanded 16 bps and is now at 720 bps, which is 16 bps above its 3-month average of 704 bps.

Equity markets in the region posted mixed performances. Argentina’s Merval Index fell 1.4%, Brazil’s Ibovespa Index increased 0.8%, while Mexico’s Mexbol Index declined 1.1%. In the U.S., the S&P 500 Index fell 0.4% for the week.

In commodities, WTI crude oil traded at $73.9/b, up 14.5% on the week, while Brent crude settled at $75.0/b, up 12.8% over the same period.

Turning to bond yields, U.S. Treasuries saw declines across the curve. The 10-year yield decreased 9 bps to 4.42%, while the 5-year yield fell 10 bps to 4.02%. In Latin America, the yield on the 10-year Mexican government bond contracted 19 bps to 6.12%, the 10-year Brazilian government bond decreased 6 bps to 6.71%, while the 10-year Argentine government bond widened 8 bps to 10.95%.

Weekly News

Initiating Coverage on CSN: Overweight on Risk-Reward

On June 13, 2025, we initiated coverage on CSN.

We are initiating coverage on CSN with an Overweight recommendation, highlighting the CSN 6.750% 2028 and 4.625% 2031 bonds as attractive across the curve, given their elevated yields of 8.8% and 9.2%, respectively, and their significant spread over the EM BB and LatAm BB curves.

CSN benefits from a vertically integrated and diversified business model across steel, mining, cement, energy, and logistics, which provides cost advantages, revenue stability, and operational synergies. Its strong domestic position in steel and cement is supported by scale, brand recognition, and efficient logistics. While exports contribute about 42% of revenue and offer FX diversification, CSN remains heavily exposed to Brazil’s macroeconomic, fiscal, and regulatory risks. The pending tax reform (Constitutional Amendment 132) could alter its cost structure, adding uncertainty to its domestic outlook. The credit story is constrained by high leverage and a significant interest burden. CSN is also exposed to commodity cycles, particularly fluctuations in iron ore and steel prices, a disruptive increase in Chinese exports, and a capital-intensive growth plan that limits financial flexibility. These pressures are somewhat mitigated by CSN’s strong liquidity position, which could be further supported by asset sales and, if necessary, a degree of flexibility to defer growth capital expenditures.

YPF and Eni Advance Argentina LNG Project with New Agreement Signed in Rome

On June 6, 2025, YPF and Italy’s Eni have signed a new agreement to advance the Argentina LNG project, marking a critical step toward the final investment decision (FID) for one of its key phases. The agreement was signed in Rome by YPF President and CEO Horacio Marín and Eni CEO Claudio Descalzi. “We are making very rapid progress with Eni. We are confident that before the end of the year we will be able to reach the final investment decision and realize this phase of this project, which is key to our country’s energy future,” stated Marín. This phase of the Argentina LNG project includes the development of infrastructure for gas production, treatment, transportation, and liquefaction via floating units, targeting a total capacity of 12 million tons of LNG per year.

The agreement outlines the concrete steps necessary to reach FID, reinforcing the momentum behind Argentina’s ambition to leverage its vast Vaca Muerta shale gas reserves. Through this initiative, YPF aims to position Argentina as a reliable long-term supplier of liquefied natural gas on the global stage. This latest development underscores YPF’s continued commitment to monetizing its unconventional gas resources and transforming Argentina into a competitive energy exporter.

EM Spreads’ take: We see this agreement as a positive credit development for YPF. The partnership with Eni adds credibility and technical strength to the Argentina LNG project. If successful, this phase could unlock material export revenues, support FX inflows, and improve long-term visibility for Argentina’s energy sector. For YPF, execution remains key, but this milestone reinforces the strategic value of its assets and long-term monetization prospects.

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Weekly News & Views

EM Spreads — Mon, 09 Jun 2025 03:49:05 GMT

Market Snapshot

The LatAm Aggregate Index contracted by 11 bps to 306 bps in the week ending Friday, June 6, 2025, and is now trading 32 bps below its 3-month average of 338 bps. The broader Emerging Market Index decreased 12 bps to 188 bps, reflecting a 20 bps contraction from its 3-motnh average of 208 bps. Meanwhile, the U.S. Aggregate Index fell by 5 bps to 120 bps, and is now 18 bps below its 3-month average of 138 bps. Notably, the EM CCC Index contracted 48 bps and are now trading 121 bps below its 3-motnh average of 817 bps.

Equity markets in the region posted mixed performances. Argentina’s Merval Index fell 5.4%, Brazil’s Ibovespa Index decreased 0.7%, while Mexico’s Mexbol Index improved 0.4%. In the U.S., the S&P 500 Index advanced 1.5% for the week.

In commodities, WTI crude oil traded at $64.6/b, up 6.2% on the week, while Brent crude settled at $66.5/b, up 4.0%.

Turning to bond yields, U.S. Treasuries saw an increase across the curve. The 10-year yield rose 11 bps to 4.51%, while the 5-year yield increased 16 bps to 4.12%. In Latin America, the yield on the 10-year Mexican government bond decreased 2 bps to 6.31%, the 10-year Brazilian government bond increased 7 bps to 6.77%, and the 10-year Argentine government bond widened 8 bps to 10.87%.

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Weekly News

Suzano to Acquire 51% of Kimberly-Clark’s International Tissue Business for $1.73bn

Suzano announced the acquisition of a 51% stake in a newly formed international tissue company through a $1.734 billion cash transaction with Kimberly-Clark, subject to certain adjustments. The agreement, disclosed on June 5, is expected to close in mid-2026 following regulatory approvals and the restructuring of assets by Kimberly-Clark in select jurisdictions. It contemplates an enterprise value of $3.4 billion for Kimberly-Clark’s International Family Care and Professional (IFP) business.

EM Spreads take: We assess the credit impact of the transaction as positive for Suzano. The acquisition is strategically sound, as it improves the company’s scale and expands its presence in the more stable tissue market while leveraging its competitive cost advantage in pulp. It also supports Suzano’s broader transition from a pure commodity exporter to a vertically integrated global player with branded consumer exposure by reducing its significant reliance on market pulp. Over time, we believe successful execution of the acquisition could contribute to a more diversified and resilient business profile. We also think the structure of the transaction, which includes the joint venture, helps mitigate integration and execution risk by facilitating a smoother operational transition.

Additionally, based on our calculations, the acquisition is being carried out at 4.9x including synergies, which we view as attractive given that tissue companies typically trade at higher multiples than pulp companies. Another positive is the minimal impact on leverage, as illustrated by the table. Lastly, management noted that further M&A is highly unlikely over the next 2 to 3 years, as the focus will be on creating value from the acquired assets, which largely removes the M&A risk from the credit for the time being.

We continue to expect that the combination of healthier pulp prices, higher sales volumes from the Ribas unit, normalized capital expenditures, lower costs, and a clear commitment to deleveraging will strengthen Suzano’s credit profile in 2025. This trend is likely to persist in the coming years, as no significant additional supply is projected to come online.

We maintain our Outperform recommendation for the Suzano (Baa3/BBB-/BBB-) 3.750% 2031 bonds, yielding 5.6% for a 4.9-year duration, and the Suzano 3.125% 2032 bonds, yielding 5.8% for a 5.7-year duration, while maintaining a Market Perform rating for the rest of the curve. Additionally, Suzano’s 2031 and 2032 bonds trade well below par at $91.2 and $85.7, respectively, while most of the rest of Suzano’s curve is priced close to or above par.

Vista Priced US$500mn 2033 Unsecured Notes at Par to Yield 8.5% (IPT: mid-8%)

On June 4, 2025, Vista Energy successfully priced a US$500 million 2033 senior unsecured bond at par to yield 8.5%. The final pricing is in line with the initial price talk of mid 8% and the guidance of 8.5%. The notes are expected to be rated BB- by Fitch. Proceeds are expected to be used for general corporate purposes, including the refinancing of existing debt and capital expenditures. The notes are governed by NY law.

The notes have a 7-year weighted average life, with semiannual interest payments and soft bullet amortization through three equal annual installments in 2031, 2032, and 2033.

We recommend a BUY on the new bonds yielding 8.5% for a 2033 maturity, which compares favorably to the VISTAA (Caa1/BB-) 7.625% 2035 notes yielding 8.3%. The new bonds offer additional yield with lower duration risk. We believe these bonds provide a more appealing yield within Vista’s debt capital structure and screen wide relative to the broader EM BB and Latam BB curves. This presents an attractive entry point for yield-focused investors comfortable with Argentina’s improving, though still fragile, macro backdrop.

Cemex Launches US$1bn Perpetual NC5 Notes to Yield 7.2% (IPT: 7.625%)

Cemex is launching a US$1 billion perpetual NC5 unsecured subordinated notes issuance to yield 7.2%, following an initial price talk of 7.625%. The notes are subordinated to all existing and future senior indebtedness, ranking senior only to capital stock. They are expected to be rated BB by S&P and Fitch. Proceeds are expected to be used for general corporate purposes, including the repayment of debt or other financial obligations.

We continue to view Cemex as an attractive and resilient LatAm credit, with a focus on profitability and deleveraging. This is supported by a management team that appears committed to maintaining healthy credit metrics, reducing debt, and improving free cash flow generation, while benefiting from a strong liquidity profile and geographic diversification.

We believe uncertainties around U.S.-Mexico relations have eased in recent weeks. Mexico is advocating for an early review of the US-Mexico-Canada Agreement, and the U.S. Department of Agriculture has committed $21 million to expand a screwworm eradication facility in Mexico, which could lead to the resumption of cattle imports. Additionally, the Mexican president has actively engaged with U.S. leadership to address bilateral concerns. That said, while challenges persist, recent developments indicate a concerted effort by both countries to strengthen their partnership.

We recommend a BUY on the new US$1 billion NC5 perpetual notes. At 7.2%, we find the bonds attractive relative to the CEMEX 5.20% 2030 unsecured notes, which yield 5.3%, and the CEMEX 3.875% 2031 unsecured notes, which yield 5.4%. We note that the perpetual notes are rated BB/BB and rank senior only to capital stock, compared to the company’s unsecured notes rated BBB-/BBB-. However, we think the perpetual notes are fairly priced given the rating differential and structural subordination.

We note that the credit story is constrained by macroeconomic uncertainties in Mexico, including a widening fiscal deficit, weak GDP growth, exposure to improved but still uncertain U.S.-Mexico relations, and foreign exchange risk.

Telecom 1Q25: Margin Gains Support Credit, But Telefónica Deal Still Central

On May 22, 2025, we published our report on Telecom 1Q25 results.

We maintain our Market Perform recommendation on Telecom Argentina (Caa1/B-/B).

Telecom Argentina reported a positive 1Q25, with healthy organic results and strong consolidated figures including Telefónica’s March numbers. Consolidated revenue increased 18.9% QoQ and 27.8% YoY to P$1,363 billion, exceeding market consensus expectations by 11.3%. The improvement was primarily driven by the integration of Telefónica Argentina, effective March 1, 2025. Service revenue rose 20.0% QoQ and 26.5% YoY to P$1,285 billion. Telecom’s service revenues excluding Telefónica increased 4.9% YoY, while Telefónica’s service revenues improved 17.1% YoY, primarily driven by real ARPU improvements across segments. Reported EBITDA rose significantly, up 50.5% QoQ and 39.9% YoY to P$452 billion. The EBITDA margin expanded 7.0 pp sequentially and 2.9 pp YoY to 33.1%, supported by operating costs increasing meaningfully below revenue growth, enhancing profitability.

From a credit perspective, the results reflected a 38.0% increase in gross debt and a 37.6% increase in net debt in USD terms sequentially. However, this was fully offset by a 56.6% sequential increase in LTM proforma EBITDA, which the company estimated at US$1.77 billion. As a result, gross leverage decreased to 2.3x as of March 2025 from 2.7x in December 2024, and net leverage improved to 2.1x from 2.4x over the same period. The company’s liquidity remains weak, with P$1,348 billion (US$1.26 billion) in short-term debt, representing 2.6x of its cash position and 30.3% of total debt. Telecom’s cash and equivalents totaled P$519 billion (US$483 million). We note that the company lacks committed revolving credit facilities. Consequently, liquidity is not sufficient to cover short-term debt.

We view Telecom Argentina’s acquisition of Telefónica as a potentially transformative transaction for the local telecom landscape, with clear synergies in mobile and broadband services. While the acquisition may make strategic sense in the long run, it introduces immediate financial, regulatory, and operational risks. The government’s decision to suspend the deal underscores elevated regulatory risk, particularly around market concentration concerns. While the financing structure appears manageable in the near term, based on covenant compliance and proforma leverage trends, uncertainty around integration timelines and potential asset divestments to meet antitrust requirements could delay any meaningful credit upside.

Telecom Prices US$800 Million Unsecured Bond Due 2033 at 9.5% Yield

On May 22, 2025, Telecom Argentina (Caa1/B-/B) successfully priced a US$800 million 8Y senior unsecured bond with a 9.25% coupon at 98.862 cents on the dollar, with a final yield of 9.5%. The final price was in line with the initial price talk of mid-9%. The notes will amortize 50% and 50% annual installments in 2032 and 2033, and the proceeds are expected to be used to pay some of the US$1.17 billion in loans issued to finance the acquisition of Telefonica Argentina.

We recommend a BUY on the new TECOAR 2033 notes. At 9.500% for a 5.3-year duration, we find the bonds attractive relative to the TECOR 9.500% 2031 unsecured bonds, which yield 8.5% for a 3.8-year duration, despite the modest extension in duration. We believe these bonds offer an appealing yield within Telecom’s debt capital structure and screen wide relative to the broader Telecom curve. This presents an attractive entry point for yield-focused investors comfortable with Argentina’s improving, though still fragile, macro backdrop.

That said, Telecom’s credit story remains constrained by uncertainty surrounding the acquisition of Telefónica, its exposure to political risk, and the currency mismatch between its revenues and debt. While we expect this transaction to improve liquidity, as of March 2025 the company’s liquidity was weak, with P$1,348 billion (US$1.26 billion) in short-term debt, representing 2.6x its cash position and 30.3% of total debt. Telecom’s cash and equivalents totaled P$519 billion (US$483 million). We note that the company lacks committed revolving credit facilities. Consequently, liquidity was insufficient to cover short-term debt.

We view the refinancing of the acquisition-related loan as credit positive. The new issue also helps extend Telecom’s maturity profile, diversify its funding base, and improve its overall liquidity, which is one of our main concerns. Leverage metrics based on the company’s proforma EBITDA appear robust and are expected to improve as the integration of Telefónica progresses. Additionally, the combination of an improving macroeconomic environment, including the easing of capital controls, declining inflation, and a growing economy, along with the recent local legislative election in Buenos Aires that provided meaningful support to the current administration, has helped reduce political risk ahead of the mid-term elections in October 2025.

All things considered, we believe Telecom is well positioned to capitalize on its strong market presence in the current environment. The notes offer attractive yields, solid leverage metrics, and stand to benefit from Argentina’s improving macroeconomic backdrop, while this transaction should help alleviate some of our liquidity concerns.

Disclaimer

Suzano to Acquire 51% of Kimberly-Clark’s International Tissue Business for $1.73bn

EM Spreads — Fri, 06 Jun 2025 19:42:12 GMT

The new joint venture will be headquartered in the Netherlands and managed by Suzano International Holding B.V., Suzano’s Dutch subsidiary. It will oversee all manufacturing, distribution, and commercial operations of Kimberly-Clark’s “family care” and “professional” tissue businesses across more than 70 countries. The asset perimeter includes 22 manufacturing facilities across 14 countries, with a total annual capacity of 1 million tons. Suzano will retain majority control, while Kimberly-Clark will hold a 49% stake and continue to own its North American tissue operations and certain joint ventures excluded from the transaction.

Regional brands will be transferred to the joint venture, while five global brands including Kleenex and Scott will be licensed royalty-free for long-term use in the covered regions. The joint venture agreement includes a call option that gives Suzano the right to acquire the remaining 49% stake beginning three years after closing, with provisions for earlier execution under specific conditions.

Weekly News & Views

EM Spreads — Sun, 18 May 2025 18:41:38 GMT

Market Snapshot

The LatAm Aggregate Index contracted by 17 bps to 315 bps in the week ending Friday, May 16, 2025, and is now trading 26 bps below its 3-month average of 340 bps. The broader Emerging Market Index decreased 16 bps to 196 bps, reflecting a 9 bps contraction from its 3-motnh average of 205 bps. Meanwhile, the U.S. Aggregate Index fell by 14 bps to 125 bps, and is now 10 bps below its 3-month average of 135 bps. Notably, the EM B and US B Indices contracted 44 bps and 48 bps, respectively, and are now trading 22 bps and 38 bps below their 3-month averages.

Equity markets in the region posted positive performances. Argentina’s Merval Index increased 9.6%, Brazil’s Ibovespa Index rose 2.0%, and Mexico’s Mexbol Index improved 2.5%. In the U.S., the S&P 500 Index advanced 5.3% for the week.

In commodities, WTI crude oil traded at $62.5 per barrel, up 2.4% on the week, while Brent crude settled at $65.4 per barrel, up 2.3%.

Turning to bond yields, U.S. Treasuries saw an increase across the curve. The 10-year yield rose 10 bps to 4.48%, while the 5-year yield increased 9 bps to 4.09%. In Latin America, the yield on the 10-year Mexican government bond decreased 3 bps to 6.36%, the 10-year Brazilian government bond declined 4 bps to 6.72%, and the 10-year Argentine government bond widened 7 bps to 10.81%.

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Moody’s Downgrades U.S. Credit Rating to Aa1 on Worsening Fiscal Outlook

Moody’s Ratings downgraded the long-term issuer and senior unsecured ratings of the United States from Aaa to Aa1 on May 16, 2025, citing a decade-long deterioration in fiscal metrics. The outlook was revised to stable from negative, signaling no further near-term changes despite rising debt burdens.

The one-notch downgrade reflects the U.S. government's persistent failure to address structural fiscal deficits and rising interest costs. Moody’s expects federal deficits to widen to nearly 9% of GDP by 2035, up from 6.4% in 2024, with the debt burden projected to surge to 134% of GDP from 98%. This path is driven by increasing entitlement spending and stagnant revenue growth, particularly if the 2017 tax cuts are extended, adding an estimated $4 trillion to deficits over the next decade.

Moody’s highlighted that interest payments are set to absorb 30% of federal revenue by 2035, a sharp increase from 18% in 2024 and just 9% in 2021, straining fiscal flexibility. Although U.S. Treasury assets continue to enjoy strong demand and the country retains unmatched economic scale and the global reserve currency, these strengths no longer fully offset weakening debt affordability and fiscal dynamics compared to other top-rated sovereigns.

Despite the downgrade, Moody’s affirmed the U.S.'s long-term country ceilings at Aaa, citing minimal risk of currency or balance of payment crises and strong policy institutions, notably the Federal Reserve’s independence and the resilience of U.S. governance frameworks. The stable outlook assumes no significant erosion in institutional strength or investor confidence in the U.S. dollar.

Moody’s indicated a future upgrade would require structural reforms to reverse fiscal deterioration, while further downgrades could occur if fiscal performance worsens significantly or institutional effectiveness weakens.

EM Spreads take: Moody’s downgrade underscores a structural fiscal unraveling that markets can no longer ignore. The federal deficit has grown significantly, and Moody’s projects it to approach 9% of GDP by 2035, driving debt to 134% of GDP from 98% in 2024. More concerning is the rising interest burden: interest payments are set to eclipse Medicare and defense outlays. Moody’s makes clear there is no credible path to reform, bluntly stating that “material multi-year reductions” in spending and deficits are unlikely under current policy proposals. This is not just a technical judgment, but an indictment of U.S. political functionality.

Moody’s also flagged "less foreign demand" for Treasurys as a rising risk, challenging the long-held assumption of infinite global appetite for U.S. debt. The refinancing wall is growing, while buyers are thinning. While we do not expect near-term disruption given institutional strength and the dollar’s entrenched role, the downgrade reinforces long-term risks.

Weekly News

MELI 1Q25: Impressive Growth, Little Room for Further Spread Compression

On May 8, 2025, we published our report on MercadoLibre1Q25 results.

MercadoLibre reported another solid set of results in 1Q25. Revenues increased 37.0% YoY (FX-neutral up 64% YoY), supported by a 17.3% increase in GMV (FX-neutral up 40% YoY) and 43.2% growth in TPV (FX-neutral up 72% YoY). Healthy growth across key markets drove revenues 7.9% above market expectations, with both Commerce and Fintech posting strong YoY growth of 32.3% and 43.3% respectively. The highlight was the continued recovery and strong performance in Argentina, which generated $1.4 billion in revenues, reflecting a 124.7% YoY increase. We note that NIMAL declined sequentially to 22.7% in 1Q25, mostly due to a higher share of lower-NIMAL credit cards in the portfolio, which rose to 42% in 1Q25 from 32% in 1Q24. NPLs increased sequentially to 8.2% but remained within the same range observed over the past 12 months. The company generated adjusted EBITDA of $935 million in the quarter, up 37.1% YoY and exceeding consensus expectations by 16.2%. EBITDA margins remained stable and healthy at 15.8%.

From a credit perspective, the results were marked by a 12.8% sequential increase in total debt and a 35.7% increase in net debt, partially offset by a 7.8% improvement in LTM EBITDA. Operating cash flow was $1.0 billion in 1Q25, down 31.8% YoY, while capital expenditures increased 83.8% YoY, resulting in free operating cash flow of $759 million, down 44.4% YoY and 71.0% QoQ. Adjusted free cash flow was a $10 million outflow, down from $160 million in 1Q24 and $680 million in 4Q24. As a result, net debt increased by 0.2x to 0.8x as of March 2025, though it remains at very healthy levels. However, liquidity remained adequate but showed signs of deterioration, with total liquidity covering short-term debt by 1.1x. This coverage declined from 1.3x in December 2024 and 1.7x in March 2024, driven by a 25.5% QoQ increase in short-term debt.

We continue to view MELI as an attractive emerging market credit story and remain constructive on its financial and business risk profile. The company’s leadership in the Latin American e-commerce and fintech sectors positions it well to capture value and manage operational risks effectively. MELI benefits from a strong operating profile, solid geographic diversification across the region, and a healthy liquidity position supported by substantial cash generation. Given its competitive advantage, we remain optimistic about the company’s fundamentals and expect continued growth and positive operating performance, which should support further improvements in credit metrics.

YPF 1Q25: Margin Expansion and Strategic Progress Back Outperformance View

On May 11, 2025, we published our report on YPF 1Q25 results.

We maintain our Outperform recommendation on YPF (Caa1/B-/CCC), with a preference for the YPFDAR (Caa1/B-/CCC) 8.500% 2029s, YPFDAR 9.000% 2029s, YPFDAR 9.500% 2031s, and YPFDAR 8.250% 2034s.

YPF reported solid operating results in 1Q25, with total production volumes increasing 6.1% sequentially, driven by higher unconventional oil production (up 6.0% QoQ) and unconventional natural gas production (up 12.6% QoQ). Revenues declined 3.0% QoQ, pressured by a 2.9% drop in Downstream revenues, although Upstream revenue improved 5.0% over the same period. Despite the revenue decline, adjusted EBITDA rose 48.8% QoQ, exceeding consensus expectations by 9.2%, with EBITDA margin expanding 9.4 percentage points following a weak 4Q24. The improvement was supported by higher fuel prices, with realized crude oil prices averaging $67.9/b in 1Q25, up 3.4% QoQ, along with a 28% QoQ increase in refining and marketing margins, which reached $14.3/b. Cost savings from the divestment of mature fields also contributed, helping reduce lifting costs to $15.3/boe in 1Q25, down 11.8% QoQ. The cost of sales declined 11.4% QoQ, outpacing the drop in revenues and supporting gross margin expansion. As a result, Upstream EBITDA increased 28.2% QoQ, while Downstream EBITDA jumped 35.8% QoQ.

From a credit perspective, the results reflected a 5.6% increase in total debt, a 10.0% increase in net debt, and a 2.1% rise in LTM interest paid compared to the previous quarter. At the same time, LTM adjusted EBITDA remained stable sequentially, and LTM funds from operations improved by 4.0% over the period. As a result, gross leverage increased 0.1x sequentially to 2.2x as of March 2025, net leverage worsened by 0.2x to 1.9x, and cash interest coverage declined 0.1x to 4.1x. Liquidity remains weak, with short-term debt representing 165% of its cash position, further pressured by continued negative free cash flow. However, YPF has maintained relatively stable access to international capital markets. We also note that management expects net leverage to return to the 1.5x to 1.6x range after the company completes the mature fields transaction, but also considering the annual average Brent of $75.5/b.

Additionally, Argentina’s improving macroeconomic environment supports a stronger sovereign credit profile. Rising U.S. dollar reserves and the recent easing of capital controls are enhancing credibility and bolstering confidence in the country’s ability to meet its debt obligations. In this context, we expect YPF to continue advancing its strategy of expanding lower cost unconventional production and investing in midstream infrastructure, while divesting from mature fields. Combined with reduced country risk, these efforts should drive outperformance in YPF bonds over the next 9 to 12 months.

Minerva 1Q25: Integration and Deleveraging Underpin Outperformance View

On May 14, 2025, we published our report on Minerva 1Q25 results.

We maintain our Outperform recommendation on Minerva (BB/BB), with a preference for the BEEFBZ 8.875% 2033 bonds, yielding 7.4% with a 4.5-year duration, as we find them more attractive than the BEEFBZ 4.375% 2031 bonds, which yield 6.9% with a 4.9-year duration

Minerva reported solid operating results in 1Q25, primarily driven by the ongoing integration of acquired assets from Marfrig. The company generated revenues of R$11.20 billion, reflecting a 4.5% QoQ and 55.8% YoY increase, but missing market expectations by 1.8%. The top line benefited from R$2.01 billion in revenue generated by newly acquired assets in Brazil and Argentina, which also contributed 79.0k tons in volume. Revenues were also supported by a 1.2% QoQ and 19.8% YoY increase in volumes sold to 415k tons, and a 3.0% QoQ and 29.5% YoY increase in average price to R$28.8/kg. This was mainly driven by a healthy domestic supply of raw materials and a favorable international environment that supported higher export prices. Adjusted EBITDA increased 2.0% QoQ and 53.1% YoY to R$963 million, but came in 1.9% below market expectations. The EBITDA margin contracted 21 bps QoQ and 15 bps YoY to 8.6% in the quarter. Management noted that the new assets were operating at EBITDA margins around 250 bps below consolidated levels, at approximately 6%, but improving sequentially.

From a credit perspective, the results reflected a 10.7% increase in LTM EBITDA, an 8.8% reduction in total debt, and a 0.4% decrease in net debt, while LTM interest expense increased 3.0%. As a result, gross leverage decreased 1.7x sequentially to 7.9x as of March 2025, net leverage improved 0.5x QoQ to 4.5x, and interest expense coverage increased by 0.1x to 1.1x. Adjusting these metrics to include EBITDA generated from newly acquired assets, adjusted gross leverage improved 0.6x to 6.5x, adjusted net leverage remained stable at 3.7x, and adjusted interest expense coverage was unchanged at 1.4x. Minerva’s liquidity remained strong, with R$11.9 billion in total liquidity, covering short-term debt by 3.8x and sufficient to meet maturities through 2029. Despite improved EBITDA, significant interest expenses, capex, and working capital requirements kept cash generation negative. Management explained that working capital consumption was related to a tactical increase in inventories, aimed at boosting profitability.

We have a positive level of confidence in Minerva’s deleveraging path, supported by expected cash generation despite integration costs and higher interest expenses. A favorable international market environment, combined with a healthy domestic supply of raw materials, should further support Minerva’s operating performance in 2025. Our view is reinforced by the company’s clear commitment to deleveraging, reflected in an approved capital increase aimed at debt reduction and the stated intention to allocate future cash generation toward further deleveraging. While Minerva has a solid track record in asset integration, we will closely monitor the pace of ramp-up execution, which we see as a key factor underpinning our constructive outlook. We continue to see substantial value in the acquired assets, with meaningful synergies expected to support sustained EBITDA margin expansion. The company’s larger scale and improved diversification should further strengthen its overall credit profile. We believe these factors will support outperformance in Minerva’s bonds over the next 9–12 months.

Suzano 1Q25: Credit Metrics Improve Despite EBITDA Miss, Remain Outperform

On May 16, 2025, we published our report on Suzano 1Q25 results.

We maintain our Outperform recommendation on Suzano’s 2031s and 2032s, while keeping the rest of the curve at Market Perform.

Suzano delivered weak 1Q25 results with EBITDA margin contraction driven by higher costs. The company generated revenues of R$11.55 billion, reflecting an 18.5% sequential decline but a 22.1% YoY increase, missing market consensus by 3.6%. Pulp revenues decreased 23.1% QoQ but increased 17.0% YoY, while Paper revenues declined 1.3% sequentially but improved 40.1% YoY. The sequential deterioration was primarily caused by an 18.1% decrease in sales volumes to 3,041kt, with Pulp sales volume down 19.3% and Paper sales volume down 9.4%, largely due to seasonal factors and strategic inventory rebuilding. Average prices declined 0.5% QoQ, with Pulp prices down 4.7%, reflecting the invoicing of backlogs at lower price levels, partially offset by an 8.9% increase in Paper average prices.

Adjusted EBITDA was R$4.87 billion in 1Q25, representing a sequential decline of 24.9% but a YoY improvement of 6.8%, significantly missing consensus expectations by 15.0%. Pulp EBITDA decreased 25.8% QoQ but improved 9.0% YoY, while Paper EBITDA declined 18.6% QoQ and 6.7% YoY. The adjusted EBITDA margin contracted by 3.6 pp sequentially and 6.1 pp YoY to 42.1% in 1Q25, primarily pressured by an 8.2% increase in cash COGS per ton, reflecting higher wood and input costs, as well as the negative impact of concentrated maintenance downtimes on fixed costs.

From a credit perspective, the results were marked by a 1.3% increase in LTM adjusted EBITDA, a 9.7% reduction in total debt, and a 5.8% decrease in net debt. However, cash interest coverage was negatively affected by a 5.1% increase in LTM interest payments. As a result, gross leverage improved 0.5x sequentially to 4.1x, net leverage decreased 0.3x to 3.4x, but interest coverage worsened by 0.2x to 4.4x. Suzano’s liquidity remained strong, with R$24.15 billion in total liquidity, covering short-term debt by 5.6x and sufficient to meet its debt obligations through most of 2028. We note that management reiterated its priority of deleveraging, balancing shareholder returns with financial prudence. In 1Q25, Suzano limited share buybacks, focusing instead on not increasing net leverage.

We expect the combination of healthier pulp prices, higher sales volumes from the Ribas unit, normalized capital expenditures, lower costs, and a clear commitment to deleveraging to strengthen Suzano’s credit profile in 2025. This trend is likely to persist in the coming years, as no significant additional supply is projected to come online.

Disclaimer

Weekly News & Views

EM Spreads — Sun, 04 May 2025 23:24:12 GMT

Market Snapshot

The LatAm Aggregate Index widened by 5 bps to 348 bps in the week ending Friday, May 2, 2025, and is now trading 19 bps above its 3-month average of 329 bps. The broader Emerging Market Index remained relatively stable at 219 bps, though this is 28 bps wider than its 3-month average of 191 bps. Meanwhile, the U.S. Aggregate Index widened by 2 bps to 145 bps, reflecting a 23 bps increase from its 3-month average of 122 bps. Notably, the LatAm Sovereign Index posted the largest spread move, widening 40 bps to 351 bps and trading 44 bps above its 3-month average.

Equity markets in the region posted mixed performances. Argentina’s Merval Index declined 5.6%, Brazil’s Ibovespa Index rose 0.3%, and Mexico’s Mexbol Index fell 1.6%. In the U.S., the S&P 500 Index advanced 2.9% for the week.

In commodities, WTI crude oil traded at $58.3 per barrel, down 7.5% on the week, while Brent crude settled at $61.3 per barrel, down 8.3%.

Turning to bond yields, U.S. Treasuries saw an increase across the curve. The 10-year yield rose 7 bps to 4.31%, while the 5-year yield increased 6 bps to 3.92%. In Latin America, the yield on the 10-year Mexican government bond rose 5 bps to 6.41%, the 10-year Brazilian government bond increased 2 bps to 6.74%, and the 10-year Argentine government bond widened 8 bps to 11.03%.

Weekly News

Cemex 1Q25: Credit Strength Persists, but No Catalyst for Spread Compression

On April 29, 2025, we published our report on Cemex 1Q25 results.

Cemex reported weak 1Q25 results. Revenues totaled $3.65 billion, reflecting a 7.4% YoY decline (l-t-l: -1% YoY), missing consensus expectations by 1.2%, primarily due to top-line deterioration in Mexico (down 25.3%) and the US (down 3.5%), partially offset by improvements in EMEA (up 2.3%) and SCAC (up 2.5%). The company generated adjusted EBITDA of $601 million in the quarter, reflecting declines of 11.7% QoQ and 17.7% YoY (l-t-l: -10%), missing consensus expectations by 3.3%. The EBITDA margin contracted to 16.5% in 1Q25 from 17.9% in 4Q24 and from 18.5% in 1Q24. The margin was supported by higher prices and lower energy and freight costs, offset by the impact of lower volumes, higher labor costs, and maintenance work. Cemex reaffirmed its guidance for flat EBITDA in 2025 despite the soft quarter, supported by cost-cutting initiatives targeting $150 million in EBITDA savings and improving trends expected in the second half of the year.

From a credit perspective, the results reflected a 4.1% sequential decline in LTM EBITDA, which was mostly offset by a 3.2% decrease in net debt and a 4.9% reduction in LTM interest paid. Consequently, gross leverage increased modestly by 0.1x to 2.9x, net leverage remained stable at 2.5x, and EBITDA coverage improved by 0.0.x to 4.3x as of March 2025. FFO to debt also showed modest improvement, increasing by 0.1 pp to 17.6% as of March 2025.

Weaker EBITDA and significantly higher expansion capex weighed on cash generation, offsetting the benefit of lower interest paid and taxes, and resulting in a net free cash outflow of $473 million in 1Q25. Including “other net” items, adjusted free cash flow was an outflow of $610 million in the quarter. However, after accounting for the $862 million inflow from asset sales, the company generated $252 million, which led to net debt reduction and relatively stable leverage metrics.

We continue to view Cemex as an attractive and resilient Latam credit, with a focus on profitability and deleveraging, supported by a management team that appears committed to maintaining healthy credit metrics, reducing debt, and improving free cash flow generation. However, we maintain our Market Perform recommendation, as we do not expect clear outperformance given the challenging outlook in the company’s two main markets, Mexico and the US, where volume demand is being affected by post-election dynamics in Mexico and weather-related issues in the US.

Pemex 1Q25: Upgraded to Market Perform, but Structural Risks Persist

On May 1, 2025, we published our report on Pemex 1Q25 results.

Pemex reported mixed 1Q25 results. The company’s top line declined 11.0% QoQ and 19.0% YoY to $19.35 billion, primarily due to ongoing production declines, lower sales volumes, and weaker pricing. However, a significant reduction in costs led to adjusted EBITDA reaching $6.08 billion in the quarter, marking a substantial sequential increase from a recent low of $726 million in 4Q24 and an 11.7% YoY improvement. The adjusted EBITDA margin expanded by 28.1 pp QoQ and 8.7 pp YoY to 31.4%. Despite this improvement in operating profitability, production continues to deteriorate. In 1Q25, Pemex’s oil and condensate production averaged 1,596 kbpd excluding partners, down 3.4% QoQ and 11.3% YoY. Including partners, total production reached 1,621 kbpd, reflecting a 3.4% QoQ and 11.4% YoY decline.

From a credit perspective, the results were marked by a 4.6% QoQ increase in LTM EBITDA and a 3.3% decline in LTM cash interest paid, while gross and net debt decreased by 5.5% and 1.2%, respectively. Free cash flow was an outflow of $471 million in 1Q25, as higher EBITDA was insufficient to cover increased capex and interest paid. However, net cash generation turned positive sequentially, driven mainly by governmental contributions and tax benefits. This underscores Pemex’s vulnerability and continued reliance on government support. As a result, gross leverage increased modestly QoQ to 7.1x from 7.0x, while net leverage improved to 6.4x from 6.6x, and interest coverage rose by 0.1x sequentially to 1.8x as of March 2025. Liquidity remained weak, with short-term debt representing over 300% of the company’s cash and short-term investments.

Pemex’s 10-year bonds offer an attractive carry, with hard-to-ignore spread levels currently at 637 bps. We remain concerned about the deterioration in operating and credit metrics, including ongoing production declines and the absence of a clear financial plan. The company’s debt service capacity continues to depend heavily on governmental support, while oil price trends remain unfavorable. However, Pemex demonstrated some ability to reduce costs and improve profitability, while government support remained strong through contributions and tax benefits, reinforced by a clear political commitment and management’s stated intention to pursue credit-positive actions. Consequently, following the recent spread widening and a number of supportive developments, we no longer see Pemex underperforming relative to Mexican sovereign debt at current levels and upgrade the credit to Market Perform. In our view, current spreads already reflect the extent of government support, but meaningful compression will require tangible credit-positive measures.

YPF and Globant Sign Agreement to Modernize Supply Chain with AI

Buenos Aires, April 30, 2025 – In a strategic move to strengthen operational efficiency and competitiveness, YPF, Argentina’s state-controlled energy giant and the world’s largest shale oil operator outside the United States, signed a Memorandum of Understanding with Globant, a leading Argentine tech firm specializing in digital reinvention through AI and software development.

The agreement focuses on modernizing YPF’s complex supply chain, comprising over 5,000 suppliers and more than 100,000 products and services, by integrating advanced Artificial Intelligence and AI Agent technologies developed by Globant. The collaboration aims to implement an adaptive, expert-supervised model capable of optimizing procurement, automating decision-making, and ensuring full policy compliance.

“Efficiency is core to YPF’s competitiveness, and this partnership is part of our broader effort to become a global player,” said YPF CEO Horacio Marín. “Globant’s capabilities will help us gain real-time visibility and control over our entire value chain.”

Globant CEO Martín Migoya praised the partnership as both a challenge and a national achievement. “It’s a privilege to help modernize a company that’s over 100 years old and central to Argentina’s energy future, especially using AI developed in Argentina.”

EM Spreads take: This initiative marks a credit-positive step in YPF’s long-term transformation plan. While the deal does not alter near-term financials, it underscores management’s commitment to sustainable cost efficiency and digital modernization. Under its “Plan 4x4,” YPF aims to quadruple exports to $30 billion by 2030. We see technology-driven supply chain optimization as a necessary pillar to achieve that target and enhance YPF’s resilience in volatile market conditions.

Disclaimer

Weekly News & Views

EM Spreads — Sun, 27 Apr 2025 23:05:05 GMT

Market Snapshot

The LatAm Aggregate Index contracted by 17 bps to 345 bps in the week ending Friday, April 15, 2025, and it is now trading 16 bps wider than its 3-month average of 329 bps. The broader Emerging Market Index decreased by 9 bps too 221 bps, 29 bps higher that its 3-month average, while the U.S. Aggregate Index narrowed by 9 bps to 146 bps, reflecting a 24 bps increase from its 3-month average of 122 bps. Notably, the US CCC Index posted the largest spread decline, falling by 44 bps to 721 bps, and is now trading 128 bps wider than its 3-month average.

Equity markets in the region posted positive performances. Argentina's Merval Index increased 2.2%, Brazil's Ibovespa Index rose 3.9%, and Mexico's Mexbol Index increased 6.8%. In the U.S., the S&P 500 Index advanced 4.6% for the week.

In commodities, WTI crude oil traded at $63.0 per barrel (-2.6% weekly), while Brent crude settled at $66.9 per barrel (-1.6%).

Turning to bond yields, U.S. Treasuries saw yield reductions. The 10-year yield decreased by 9 bps to 4.24%, while the 5-year yield declined 8 bps to 3.86%. In Latin America, the yield on the 10-year Mexican government bond contracted 17 bps to 6.36%, the 10-year Brazilian government bond fell 25 bps to 6.72%, and the 10-year Argentine government bond was 57 bps lower to 10.95% over the week.

EM Spreads - Weekly News & Insights - Apr 27

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Argentina’s Economy Grows Above Expectations in February

Argentina’s economy expanded 5.7% YoY in February 2025, surpassing the median forecast of 5.5% and reinforcing signs of recovery under President Javier Milei’s administration. On a sequential basis, economic activity increased 0.8% in February after a 0.6% improvement in January, according to government data released Tuesday.

The financial sector led growth, while the social services sector contracted. February’s outperformance follows two quarters of contraction in 2024, when Milei’s austerity measures weighed heavily on domestic activity. Since the second half of 2024, however, the economy has demonstrated greater resilience, supported by stronger exports, government spending, consumer demand, and capital expenditures.

The recovery is occurring alongside sharp disinflation. Annual inflation cooled to 55.9% in March from a peak of 211% in December 2024, helped by Milei’s reforms and the easing of capital controls. The loosening of capital controls has contributed to a stronger FX market, narrower parallel exchange rate gaps, and renewed investor appetite for local assets, supporting improved market liquidity and lower sovereign spreads. The recent $20 billion IMF financing package, with $12 billion disbursed upfront, has further bolstered confidence by stabilizing reserves and easing FX restrictions without destabilizing the peso.

Looking ahead, economists surveyed by Argentina’s central bank expect the economy to grow 5% in 2025, reflecting growing optimism around the country's near-term prospects. Market consensus anticipates a strong rebound, with projected growth of 3.5% in 1Q25, 7.1% in 2Q25, and 3.5% in 3Q25. Despite the previous recession, unemployment has remained relatively stable, staying below 8% and projected to remain in the low-7% range in the coming quarters. Market expectations also point to quarterly inflation declining below 30% by the end of 4Q25 and to around 22% by 3Q26.

Weekly News

Vista 1Q25: Strategic Petronas Acquisition Strengthens Credit and Growth Outlook

On April 25, 2025, we published our report on Vista 1Q25 results.

Vista reported 1Q25 results largely in line with expectations. The company generated an adjusted EBITDA of $275 million in the quarter, reflecting a 0.8% sequential improvement and modestly missing consensus expectations by 0.3%. The adjusted EBITDA margin expanded by 4.8 pp QoQ to 62.8%, primarily driven by higher realized prices and lower trucking volumes, representing a $14 million sequential reduction in selling expenses as the Oldelval expansion came online. Vista’s production declined 5.1% sequentially to 80.9 kbpd in 1Q25 as the company backloaded activity to optimize the use of the Oldelval pipeline expansion and minimize trucking. Financially, Vista maintains healthy credit metrics and a high EBITDA margin, supported by its low-cost production profile, while 78% of domestic volumes were sold at export parity-linked pricing, bringing the total share of oil volumes sold at export parity pricing to 90%.

From a credit perspective, the results reflected a 15.2% QoQ rise in Vista’s total debt balance, coupled with a 15.3% sequential increase in LTM interest payments, partially offset by a 5.0% sequential improvement in LTM EBITDA. Consequently, gross leverage increased modestly by 0.1x to 1.6x, net leverage worsened by 0.2x to 0.9x, and EBITDA coverage declined 0.9x to 9.0x as of March 2025. Nevertheless, credit metrics remain solid.

Petronas acquisition. Vista Energy announced the acquisition of 100% of Petronas E&P Argentina. We view the acquisition as a strategically sound move that aligns with Vista’s long-term growth strategy and materially enhances the company’s production profile, midstream capacity, and P1 reserves. The La Amarga Chica block has demonstrated consistent production growth at low operating costs, offering compelling growth potential. The transaction also improves Vista’s profitability and cash flow profile, with a pro forma EBITDA margin of 68%, and strengthens its portfolio of ready-to-drill locations in the core area of Vaca Muerta. The acquired assets are high-margin and low-breakeven, with meaningful potential synergies across existing operations. These synergies could help reduce capex requirements, which is particularly relevant in the current global macro and oil price environment.

While we expect capex needs and total debt to rise, the long-dated structure of the deferred payments, coupled with the equity contribution and the uplift in pro forma EBITDA to $1.81 billion, should provide sufficient flexibility to maintain credit metrics at manageable levels. We also view the acquisition as attractive from a valuation standpoint. Based on 2024 metrics, La Amarga Chica was acquired at 2.06x EV/EBITDA versus Vista’s 4.9x, and at 34.6x EV/kbpd compared to Vista’s 62.8x EV/kbpd.

Fitch Affirms Cemex at 'BBB-'; Stable Outlook Reflects Resilient Credit Profile

Fitch Ratings has affirmed Cemex’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BBB-' with a Stable Outlook, citing the company's solid liquidity, manageable leverage, and resilient business model amid macroeconomic headwinds. The ratings on Cemex’s senior unsecured notes were also affirmed at 'BBB-' while its hybrid subordinated issuance remains at 'BB'.

Fitch expects Cemex to maintain its net adjusted leverage between 2.0x and 2.5x over the next few years, supported by strong operating cash flows, disciplined capex management, and geographic diversification. Although 2025 is expected to be challenging, particularly in Mexico and the U.S., the company’s pricing strategy and operational efficiencies should help sustain free cash flow generation. Adjusted EBITDA is projected to range between USD2.7 billion and USD3.2 billion, with margins near 17% to 18%. Cemex continues to prioritize strategic growth through bolt-on acquisitions and targeted capex, allocating USD600 million out of a USD1.4 billion total budget to growth initiatives in 2025. It is also preparing to issue a new subordinated bond by year-end following the April redemption of a USD1 billion hybrid note.

Fitch highlights Cemex’s strong liquidity, backed by USD864 million in cash and undrawn credit facilities totaling USD2.3 billion, with no significant maturities until 2026. Cemex’s business remains well diversified across markets and products, with Mexico and the U.S. contributing a combined 74% of EBITDA in 2024. While a deterioration in U.S. or Mexican macro conditions, rising leverage above 2.5x, or lower pricing power could pressure the rating, stronger EBITDA performance and sustained leverage near 1.5x could lead to an upgrade.

EM Spreads take: We think Cemex’s affirmed rating reflects a balanced credit profile that continues to benefit from geographic diversification, stable cash flow generation, and financial discipline. While we acknowledge the near-term pressure on volumes in key markets, we view the company’s financial flexibility and strong liquidity position as key credit strengths. The disciplined approach to capex and leverage management supports our view that Cemex can navigate cyclical pressures while preserving investment-grade metrics.

Suzano Evaluates International Paper’s Pulp Assets

Suzano is reportedly evaluating the acquisition of International Paper’s (IP) North American pulp assets, according to sources cited by Valor. The potential transaction would align with Suzano’s strategy to expand its international footprint, although it could temporarily divert the company from its deleveraging path, as reiterated during its Investor Day and Q4 2024 earnings call.

The sale process follows IP’s October 2024 announcement of a strategic revision aimed at exiting its Global Cellulose Fibers (GCF) business to focus on sustainable packaging solutions. The GCF operations span three countries and consist of eight mills and two conversion facilities, with operations in the United States, Canada, and Poland. During its March 2025 Investor Day, IP guided for the GCF business to generate approximately USD2.5 billion in revenue and USD300 to 400 million in adjusted EBITDA.

While Suzano is among the companies reportedly considering the acquisition, along with Chile’s CMPC and Singapore-based Royal Golden Eagle (RGE), deal execution could be challenged by geopolitical uncertainties, including the recent imposition of tariffs on imports from Brazil and other countries.

A successful acquisition would mark another step in Suzano’s international expansion strategy. However, the company has emphasized its commitment to maintaining financial discipline and deleveraging, particularly after the strategic shift that followed its unsuccessful USD15 billion bid for International Paper in 2024. Suzano has since focused on smaller, scale-enhancing acquisitions, including the purchase of Kimberly-Clark’s Brazilian hygiene paper operations for USD175 million and selected assets from Pactiv Evergreen and Lenzing.

Suzano declined to comment on the matter.

EM Spreads take: We view Suzano’s potential acquisition of IP’s GCF assets as strategically consistent with its international growth objectives. However, given management’s reiterated focus on balance sheet strength and deleveraging, we believe any bid would require compelling operational synergies and financial accretion to justify a temporary pause in its deleveraging trajectory. Execution risks, including trade policy volatility, will also be important factors to monitor.

MercadoLibre CEO Sees U.S.-China Trade War as Major Opportunity

MercadoLibre CEO and founder Marcos Galperin believes the escalating U.S.-China trade tensions present a significant long-term opportunity for Latin America, particularly for countries like Mexico that are well positioned to benefit from supply chain shifts. Speaking at Riverwood Capital Management’s LatAm Tech Forum in Miami, Galperin said he expects a “permanent shift” in global trade dynamics, with Latin America playing an increasingly important role.

"If Latin America plays its cards well, I think it could benefit from this volatility," Galperin told CNBC. He highlighted that American companies have already begun relocating manufacturing operations from China to Mexico, leveraging Mexico’s free trade agreement with the U.S., which protects certain imports from steep tariffs. Meanwhile, U.S. trade policies have hit Chinese goods hardest, facing a 145% tariff. Shares of MercadoLibre, Latin America’s leading e-commerce and payments platform, have risen nearly 30% year-to-date, outperforming Amazon, whose stock is down 15% amid heavy tariff exposure.

Galperin also commented on the domestic situation in Argentina, praising President Javier Milei’s free-market reforms. Since taking office in late 2023, Milei has moved to eliminate tariffs and import restrictions, a stark reversal from Argentina’s traditionally protectionist stance. "I think what Milei is doing is great for Argentina," Galperin said, though he acknowledged that the reforms would come with near-term challenges. "Changes are painful, and I hope that people have the patience and the time to give him to see that these changes in the medium and long term really create benefits for everyone," he added. Galperin, Argentina’s richest person with an estimated fortune of USD8.7 billion, remains optimistic that both the regional and domestic policy shifts will drive long-term benefits for Latin America’s competitiveness in global trade.

EM Spreads take: We believe the structural shift in global trade dynamics presents a medium-term tailwind for MercadoLibre’s expansion and broader Latin American economic integration. While short-term volatility remains a risk, the combination of reshoring trends, Milei’s market-friendly reforms, and growing e-commerce penetration supports a constructive long-term outlook for MercadoLibre’s operating environment.

Pemex Rig Suspensions Highlight Ongoing Operational and Financial Risks

Pemex’s tight budgetary conditions have led to the suspension of four offshore drilling rigs operated by Grupo Mexico, company executives said during their 1Q25 earnings call. Discussions between Grupo Mexico and Pemex are ongoing, with expectations that the rigs could return to operation later this year, although no firm timeline has been provided.

The rig suspensions contributed to an 8.1% YoY decline in Grupo Mexico’s infrastructure sales in 1Q25 and underscore the broader operating challenges facing Pemex. We see this development as further evidence of Pemex’s constrained financial flexibility, amid continued reliance on government support and an absence of clear financial planning. While management remains focused on preserving upstream production levels, suspending drilling activities risks exacerbating Pemex’s structural production declines, particularly given the company’s heavy exposure to mature fields.

The situation follows a series of budget-related operational disruptions, including curtailed refinery runs at Tula earlier this year, highlighting Pemex’s persistent operational and financial vulnerabilities. Although management has reiterated its commitment to stabilizing operations, the company's weak liquidity position, mounting supplier debts, and dependence on external support continue to pose substantial risks.

EM Spreads take: We view the suspension of four offshore rigs as a clear signal of Pemex’s ongoing budgetary pressures and their operational consequences. While the expected reactivation of the rigs would provide some relief, the broader picture remains concerning. Pemex’s financial and operational flexibility remains limited, and its ability to stabilize production volumes without further interruptions appears uncertain. We maintain a cautious view on Pemex’s credit profile pending concrete actions to address these underlying challenges.

Disclaimer

Vista Energy Expands Vaca Muerta Footprint with Strategic Petronas Deal

EM Spreads — Thu, 17 Apr 2025 20:05:21 GMT

Photo by Francesco Boncompagni on Unsplash

Vista Energy announced the acquisition of 100% of Petronas E&P Argentina, securing the remaining 50% interest in the La Amarga Chica (LACh) block in Vaca Muerta. The transaction is valued at approximately US$1.38 billion based on discounted deferred payments, or around US$1.5 billion if the deferred payments are not discounted. It includes US$900 million in upfront cash, US$300 million in deferred payments due in April 2029 and April 2030 without interest, and 7.3 million Vista ADS shares, representing a 7.1% stake. The shares are valued at approximately US$295 million based on the prior US$40.38 per share closing price. They will be subject to lockup restrictions, with 50% expiring in October 2025 and the remaining 50% in April 2026. Vista funded the acquisition through internal cash and a US$300 million four-year loan from Banco Santander.

EM Spreads: Market Commentary and News

Vista Acquires Equinor’s Vaca Muerta Assets, Reinforcing Core Acreage Position

Recommendation and credit view

CSN: S&P Downgrade Reinforces Execution Risk, Thesis Persists

Simpar and Subsidiaries Deliver Solid 4Q25 Preliminary Results

CSN Launches Divestment Plan to Reduce Debt by R$15–18 billion

Braskem Coupon Payment Alleviates Immediate Default Risk

Pemex: Debt Strategy Extends Support, Spreads Tighten vs Mexico

Weekly News & Views

Market Snapshot

Weekly News

Argentina: Election Setback Highlights Elevated Political Risk

Suzano Priced US$1bn 5.500% 2036 Unsecured Notes

Pemex: Bond Buyback Offer Highlights Sovereign Support and Debt Relief

YPF Advances LNG Push with New Partners Sought for $25bn Projects

MercadoLibre Fintech Momentum, CEO Transition, and New Growth Pilots

Moody’s Upgrades Pemex to B1, Stable Outlook

Mexico – S&P Affirms ‘BBB’/‘BBB+’, Stable Outlook On Policy Prudence And Solid External Position

See Also:

Disclaimer

Argentina: Election Setback Highlights Elevated Political Risk

Pemex: Bond Buyback Offer Highlights Sovereign Support and Debt Relief

Weekly News & Views

Market Snapshot

2Q25 Earnings Recap

Telecom 2Q25: Neutral Amid Uncertainties While Upside Remains Limited

Suzano 2Q25: Credit Resilient but Curve Positioning Shift

YPF 2Q25: Encouraging Strategic Progress Supports Overweight View

Minerva 2Q25: Strong Results and Deleveraging Support Overweight Call

MELI 2Q25: Constructive on Growth Prospects, Limited Spread Compression

CSN 2Q25: Stable Credit Metrics and Attractive Carry Support Overweight

Gerdau 2Q25: Credit Resilience Supported by US Exposure

Pemex 2Q25: Strong Government Backing Anchors Credit

Cemex 2Q25: Resilient Credit Navigates Soft Results, but Tight Spreads Limit Upside

Vista 2Q25: Results Reinforce Overweight, But Cash Burn and Liquidity Weaken Buffer

Weekly News

MercadoLibre Launches Credit Card in Argentina

Fitch Affirms Minerva at BB; National Scale Upgraded to AAA(bra)

Government’s PEMEX Support Credit Neutral for Mexican Banks

See Also:

Disclaimer

Weekly News & Views

Market Snapshot

U.S. Tariff Escalation: Credit Implications for Brazilian Companies in Our Coverage

Weekly News & Views

Market Snapshot

Brazil Macro

Weekly News

Minerva Announces Divestment of Uruguayan Asset to Allana

YPF Advances Divestment Strategy to Prioritize Vaca Muerta Development

CSN Cimentos Brasil Finalizes Terms of R$550 Million Debenture Offering

See Also:

Disclaimer

Weekly News & Views

Market Snapshot

Weekly News

Initiating Coverage on CSN: Overweight on Risk-Reward

YPF and Eni Advance Argentina LNG Project with New Agreement Signed in Rome

See Also:

Disclaimer

Weekly News & Views

Market Snapshot

Weekly News

Suzano to Acquire 51% of Kimberly-Clark’s International Tissue Business for $1.73bn

Vista Priced US$500mn 2033 Unsecured Notes at Par to Yield 8.5% (IPT: mid-8%)

Cemex Launches US$1bn Perpetual NC5 Notes to Yield 7.2% (IPT: 7.625%)

Telecom 1Q25: Margin Gains Support Credit, But Telefónica Deal Still Central

Telecom Prices US$800 Million Unsecured Bond Due 2033 at 9.5% Yield

See Also:

Disclaimer

Suzano to Acquire 51% of Kimberly-Clark’s International Tissue Business for $1.73bn

Weekly News & Views

Market Snapshot

Moody’s Downgrades U.S. Credit Rating to Aa1 on Worsening Fiscal Outlook

Weekly News

MELI 1Q25: Impressive Growth, Little Room for Further Spread Compression

YPF 1Q25: Margin Expansion and Strategic Progress Back Outperformance View

Minerva 1Q25: Integration and Deleveraging Underpin Outperformance View

Suzano 1Q25: Credit Metrics Improve Despite EBITDA Miss, Remain Outperform

See Also: