Paraguayan Dials in Robust Demand

Telefonica Celular del Paraguay (Telecel) has priced a $300m 2022 NC5 bond in a debut transaction that signifies a continued broadening of DCM access for Paraguayan credits. The first non-bank international issuer from Paraguay drew $4bn in orders and saw a pop in the aftermarket. The BB telecom priced at par with a 6.75% coupon to yield tight to the low 7%-area initial price thoughts. The bond traded up 2-3 points in the grey, traders say. Investors following the deal say Telecel attracted US high-yield accounts and dedicated EM buyers. “We were excited at 7.0%, but clearly a lot of people stayed once it tightened with some accounts heard looking to stick around even at 6.5%,” says a New York-based EM investor citing 7.00% as fair value and opting out of the trade at 6.75%. The buyside saw the deal as a loose proxy for Paraguayan sovereign risk. “Paraguay is highly exposed to agriculture and commodities, but the country is run conservatively so we’re not too concerned about political issues,” says a participating East Coast EM investor. The buyer adds that 6.75% was a justifiable level to help compensate investors for questions arising over Telecel’s capex plans and pending regulations from Paraguay’s congress. Telecel holds a strong market position as the main operator in the Paraguayan telecom sector. Despite increased competition in recent years, it holds a comfortable 57% market share in the mobile segment. While it has 100% penetration in the telephony segment, it is looking to branch out in broadband and pay TV. It recently acquired Cablevision, which holds 89% market share in pay TV and sizeable fixed broadband operations. Proceeds from the bond issue will be used to repay a $150m bridge loan raised for the Cablevision buy, with the balance to finance capex and potential spectrum license costs. Citi and Morgan Stanley managed the deal. Telecel operates the Tigo brand and is a subsidiary of Millicom International Cellular. The deal follows Banco Continental P