LatinFinance - July 2013 - 16

Swiss franc bonds

Taking comfort
By Ben Miller and Mariana Santibáñez

T

he first weeks of June were not
a friendly period for LatAm debt
issuers in the dollar market. US
Treasury yields jumped on fears that ultralow rates in the US were coming to an
end, repricing curves for dollar issuers and
forcing borrowers to put deals on ice.
The 125 million Swiss francs raised
by Banco Santander Brasil and the 225
million Swiss francs raised by Banco
de Chile in those weeks did not set any
records for size. But they demonstrated
a funding option that is still open for a
growing number of Latin issuers. Latin
borrowers have sold more than $1 billion
annually in Swiss francs since 2010, after
just a trickle in the years before.
This year is shaping up to be a recordbreaker. LatAm borrowers raised a record
$1.57 billion-equivalent from nine Swiss
franc deals this year through June 11,
according to Dealogic. That outstrips
the $625 million from three deals in the
corresponding period in 2012. It also beats
the more than $1.44 billion from six deals
that Latin issuers sold during all of 2012.
“Equities were a bit negative, but we
have seen a strong Swiss franc market over
the past weeks and decided to go ahead
with a transaction,” Álvaro Carbajosa,
Santander Brasil’s head of international
funding, said at the time of his bank’s deal.
The 2015 bond, increased from a
planned 100 million Swiss francs, was
priced slightly through secondary levels of
the bank’s existing CHF bonds and offered
attractive pricing versus dollars at shorter
tenors, Carbajosa said.
“The Swiss franc market tends to be
less volatile than others,” says Dominique
Kunz, managing director and head
of Swiss DCM at Credit Suisse, which
managed the Santander Brasil sale. “And
it plays in our favor most times, though
sometimes not.”

16 LatinFinance

July 2013

With US rates poised to rise, Latin borrowers are turning to Swiss
francs in record numbers

When the going gets tough: Latin issuers look north
Spreads tend to rally in dollars ahead
of the Swiss franc market, Kunz says. So
issuers typically find conditions in the
dollar market more attractive on a bullish
day – but favor the Swiss market when
spreads are widening or rates rising. Also,
the new issue premium is often bigger
than in the Swiss market.
Santander Brasil’s 1.125% coupon
bond was priced to yield 1.150%, or midswaps plus 100 basis points. The deal drew
approximately 50 accounts with banks
taking two-thirds of the deal.
Almost all transactions are swapped at
pricing or little bit later to dollars or the
home currency. The Swiss market is, of
course, not for borrowers’ natural needs
but rather for diversification and attractive
pricing.

While its portfolio is mainly in reais and
dollars, Carbajosa says Santander Brasil
will continue to evaluate new markets in
different currencies if swap rates make
sense. While the bank planned to see more
investors in Europe, transactions in euros,
and the necessary accompanying swap to
dollars, were expensive in early June.
Banco de Chile tapped the Swiss
market a week after Santander Brasil. It
followed a 50 million Swiss franc retap
earlier in the year with a new 2016
floating-rate bond. The note pays threemonth Libor plus 60 basis points, and joins
a small but growing LatAm floating rate
note club across currencies.
América Móvil in May clinched the
lowest-yet coupon for a LatAm issuer in
the Swiss market, and likely the tightest-
LatinFinance - July 2013

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