Codelco Heard Picking Banks for Bond

Chilean state-owned copper producer Codelco is understood to have mandated and HSBC and JPMorgan for a bond issue which is unlikely to happen short term. The two apparently took the highest rated LatAm corporate credit on an extensive roadshow in September but they have kept their powder dry ever since. A $500m-$700m 10-year trade was initially expected, but the copper producer is choosing its timing with care. “The market is theoretically open for a name like Codelco,” says a banker who pitched for the deal but lost. “But there is still the problem of willingness to pay.” The banker adds that Codelco would be comped versus global peers like BHP and Rio Tinto, rather than the sovereign, and may not be willing to pay the extra spread required for commodity weakness. The local market, which sprang to life last week with an Arauco trade, is not deep enough for Codelco, which tends to issue in size. Codelco has historically brought bonds every year in the fourth quarter, though last year it opted for a tightly priced loan. In 2006, it issued a $500m 6.15% of 2036 through Deutsche Bank and HSBC at 99.296 to yield 6.202%. Expect Codelco to be among the first LatAm bonds out the gate when markets stabilize, likely early 2009, and high grade jumps back in.