The return last June of Brazilian mining giant Vale to the 30-year tenor in the international bond markets after a 12-year absence was significant enough; the seamless execution of the transaction also helped set it apart.
The company took advantage of a window of opportunity to launch a new $1 billion offering of senior unsecured notes, along with a concurrent $500 million cascading tender offer that targeted notes maturing in 2034, 2036 and 2039.
The market’s response to the deal, which wins Corporate High-Grade Bond of the Year, was overwhelmingly positive. The orderbook was oversubscribed 7.7x at $7.6bn, which allowed Vale to price the bond at 6.4% — a tightening of 40bp from initial price thoughts.
Demand for the bond reached the highest level of oversubscription for a 30-year note in Latin America in the past five years, according to Citi, which acted as one of the deal’s global coordinators. The bank points out that the orderbook comprised a “healthy mix” of high-quality emerging market funds and crossover investment-grade demand (US crossover demand represented 75% of total orderbook, Citi notes).
“Our main goal was to capture a favourable market moment to issue a 30-year bond, extending the average life of our debt and refinancing short term or higher cost debt,” says Patricia Rodrigues, the head of International Treasury at Vale.
“We constantly monitor capital markets, and we concluded that conditions were favourable for a new issuance, thanks, in particular, to the reduction of the levels of US Treasuries since May and the low spreads paid by our outstanding bonds.”
She adds that Vale is ready to pounce as and when financing windows open in 2025, irrespective of geopolitical and macroeconomic headwinds which may otherwise spell turbulence for the bond markets in the year ahead.
“We have not identified any significant impact of those factors on our financing alternatives,” Rodrigues say. “Vale is a company that is financially very solid, with a global presence and a solid base of investors. Also, our financing strategy is flexible, which makes it easier for us to adapt ourselves to changes in the global economic environment.”
Ratings agency Fitch in October affirmed the company’s BBB rating, while raising its outlook to stable to positive, citing more limited environmental uncertainties and litigation risks following Samarco’s recent settlement, in addition to Vale’s product diversification, “enhancing its position” within its investment grade category.
Joint Bookrunners: BofA Securities; Bradesco BBI; BMO; Citi; Credit Agricole; Goldman Sachs; HSBC; MUFG; UBS
Underwriters’ Counsel: Gibson Dunn; Pinheiro Guimarães; Walkers
Issuer’s Counsel: Cleary Gottlieb
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