Codelco to Glide Through Refi Challenges

Chile’s quasi sovereign companies Codelco and ENAP will have no problems in meeting their short term debt maturities, say Fitch analysts. “I would expect that in the next 12 moths [Codelco’s] financing needs will be matched through a combination of bilaterals and local market financing,” says Fitch’s Daniel Kastholm, adding the question is not whether it will be able to meet those needs, but at what cost it is willing to do so. Both Codelco and ENAP have demonstrated an ability to squeeze lenders for the tightest possible pricing, while Chilean local markets have on multiple occasions this year, absorbed sizable debt offerings at relatively affordable costs to issuers. Codelco’s forward 12-month debt maturities as of March 2009 stood at $1.4bn, according to Fitch. The company also has some $800m in cash on hand. Earlier this year, Codelco entertained offers from banks for some $400m in 3-year funds. Eager lenders pitched aggressively, pushing the price discussions to levels in the low 200bp over Libor area, say bank syndicators. And ENAP said last week that it clinched $300m in bilateral-like loans from Santander, BNP Paribas and HSBC. The all-in cost to the issuer stands in the 200bp over Libor area, according to bankers off the deal. Codelco would command a tighter spread than ENAP, which suggests it could easily raise 3-year funds at below 200bp over Libor. Codelco has also filed a local bond shelf, rated AAA by Fitch, though size and timing of the program have not been disclosed.