CAF Upsizes Euro Bond

With European volatility subsiding on news of a likely Irish bailout, CAF was able to raise a EUR400m bond Monday, upsizing from a planned EUR300m. The Venezuela-based multilateral lender drew about EUR900m in orders, according to a banker on the deal, after meeting the buyside last week. BNP and HSBC managed the sale. The A1/A+ 2018 priced at 99.603 with a 4.625% coupon, to yield 4.694%, or mid-swaps plus 200.0bp. “One of the objectives was to have the cost at most at USD levels,” Gabriel Felpeto, CAF’s director of financial policies and international issues, tells LatinFinance. Had CAF done a 2018 dollar bond, the issuer would have looked for a USD Libor mid-swaps plus about 220bp, explains a banker on the deal, which would be equivalent to euro mid-swaps plus 200bp or slightly less. CAF also wanted to diversify its funding and return to a market it had not issued in since 2006, Felpeto says. “There had been troubling news coming out of Europe, though many investors were more willing to diversify out of Europe and into LatAm,” he adds. “They priced tight – only about 30bp wide of Spain, though maybe that’s not surprising anymore,” says a UK-based EM investor considering the deal, referring to the troubled Aa1 sovereign’s trading at around mid swaps plus 168bp-170bp. The investor does not see much contagion risk going forward for LatAm issuers on bad news from Europe, though with the US Thanksgiving holiday and the end of the year approaching, new bond issuance may be limited for the rest of 2010. The more than 80 accounts participating in the deal were mainly high-grade portfolio managers, Felpeto says. About 33% came from France, 20% from each of the UK and BeNeLux, and 10% from Germany, with the remainder from other countries, according to a banker on the deal. CAF priced CHF250m in 2.625% 2015 bonds last month in the Swiss market at a 2.650% yield. Its last public euro-denominated deal was a EUR300m 2006 offer, though it raised EUR100m in 2015 floating-rate bon