Latin Finance - March/April 2011 - 54

chile corporate debt

a newcomer in the bond market, while must invest, which means that they can The bank was planning to issue Salfacorp was already well-known. accept tighter spreads,” says a Chileup to 2.5 million UF in three and fiveIn September 2010, Salfacorp issued based DCM banker, who asks not to be year bonds in Chile, and then to swap 2.0 million UF in debt, including a 1.0 identified. the UF funds into US dollars, treasury million UF five-year priced at 98.65 with vice president Gregory Testerman tells a coupon of 3.25% to yield 3.47%. A Rise of the Triple Bs LatinFinance. BBVA was leading the sale. 1.0 million UF 21-year piece meanwhile In a market accustomed to seeing bond Testerman said in late January the priced at 99.56 with a 4.00% coupon to issues from companies with ratings in the bank was waiting for the best conditions yield 4.00%. AA area, issuance and demand for lowerin the swap market before issuing. Another company to issue bonds rated bonds is expected. Supermercados Milciades Denis, Bladex’s head of treasury, after the intervention was announced del Sur, rated BBB+, saw demand for its says the cost of issuing directly in US was power company Transelec, rated paper soar to twice the offer size. dollars is around 15-20 basis points higher A+, which sold 7.0 million UF in three “Investor demand for bonds with than in UF after a swap. series. A 2.5 million UF 2016 bond priced low investment grade ratings has been Mexican state oil producer Pemex at 99.60 with a 3.65% coupon to yield increasing in recent years,” says Alvaro could also break new ice as the first quasi 3.74%. A 1.5 million UF 2032 tranche Taladriz, fixed income manager at sovereign from outside Chile to tap pesos. priced at 97.90 with a 4.05% coupon LarrainVial, which has $1.2 billion in Mauricio Alazraki, managing director to yield 4.20%. A 3.0 million UF 2039 fixed-income AUM. He adds that there of finance and treasury at Pemex tells portion priced at 95.33 with a 3.95% to are only about five issuers with A- or BBB LatinFinance that the company considers yield 4.24%. ratings. Chile more attractive than potential new The five-year tranche fell within the markets like Australia, since company’s expectations of a proximity makes it easier for 3.5%-4.0% yield. The 21.5 Evolution of UF Benchmarks (%) investors there to understand February levels mostly lower than peaks in previous years and 28-year also came inside the credit. the 4.0%-4.5% target of Japan’s Marubeni is High through Transelec finance manager also expected to issue 5.0 Tenor 2008 high 2009 high 2010 high Feb 1, 2011 Peter Merrill. The 28-year million UF through local BCU-5 3.52 3.46 2.81 2.88 tranche achieved a lower cost investment vehicle AYS Tres BCU-10 3.54 3.38 3.26 3.25 than the 21.5-year because to finance its acquisition of it is non-callable. Scotia and a 50% stake in water utility BCU-20 3.97 3.82 3.70 3.48 Corpbanca managed the sale, Aguas Nuevas, for which it Source: Superintendencia de Valores y Seguros de Chile which raises funds for 2011 paid $124 million. Celfin is capex and to refinance about leading that sale. $280 million in debt due in April. According to Bezanilla, investors Mexico’s América Móvil opened the Merrill says demand was more than seeking such paper are mostly high-net huaso market in April 2009 with 4.0 double the amount offered. He adds that worth clients wanting better returns. “I million UF in 2014 notes at government rates achieved were actually lower than think this trend will grow in the future. bonds plus 141 basis points. It returned to what the company had achieved in 2009 A local high yield category would be very Chile in May 2010 issuing 5.0 million UF despite the UF widening. For instance, attractive as it would add depth to the in 2035 notes at government bonds plus in August 2009, Transelec issued a 3.0 local market,” he adds. 70 basis points. million UF 22-year bond yielding 4.80%. Chile agribusiness company Copeval Banco de Crédito del Peru also issued “We were expecting the five-year is considering issuing up to 2.5 million UF a huaso in November 2009. The Peruvian tranche to have a spread of 110 basis in local bonds rated BBB+ to fund capex. bank placed 2.7 million UF in 2014 bonds, points, but it came out at around 95 basis The company expected to issue two at government bonds plus 140 basis points. For the longer tenors we expected tranches, one for 10 years and the other points. spreads of around 100 basis points, but for 30. IM Trust and LarrainVial were to And while many local corporates may they came out at between 80 basis points handle the sale. Meanwhile, financial prefer to issue in Chile, going abroad also and 90 basis points,” Miller explains. He services company Progreso planned to has its advantages. adds that the 28-year tranche enjoyed issue a 10-year 1.0 million UF bond. “The benefit of issuing dollar bonds the most demand from investors such as abroad is that issuers can introduce pension funds and insurance companies, Foreign Invasion themselves to new markets and issue which make long-term investments. More foreign companies are expected to much larger amounts than if they issued One of the drivers of relatively low issue UF bonds in Chile. One of them is locally,” says Juan Cristóbal Peralta, spreads is the fact that Chilean pension Panama-based trade finance bank Bladex, HSBC’s co-head of global banking. He funds have to invest about 20% of their which as of January 27 was expected to adds that companies issuing in Chile can portfolio in local bonds. “They receive launch the first huaso bond of the year, achieve tenors of 20-30 years, while in the about $500 million a month that they but had not done so by mid February. US they usually get 10 years. LF
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March/April 2011

Latin Finance - March/April 2011

Table of Contents for the Digital Edition of Latin Finance - March/April 2011