Category: Chile

Chilean power transmission company Transelec has sold UF7.0m ($282m) in 3 series of inflation-linked bonds in the domestic market, it says. A UF2.5m 2016 bond priced at 99.60 with a 3.65% coupon to yield 3.74%. A UF1.5m 2032 tranche priced at 97.90 with a 4.05% coupon to yield 4.20%. A UF3.0m 2039 portion priced at 95.33 with a 3.95% to yield 4.24%. The 5-year fell within expectations of a 3.5%-4.0% yield. The 21.5-year also fell within expectations of 4.0%-4.5%, according to expectations of Transelec’s finance manager prior to the sale. The 28-year came in under a 4.0%-4.5% estimate. The 28-year tranche achieved a lower cost than the 21.5-year because it is non-callable. Scotia and Corpbanca managed the sale, which raises funds for 2011 capex and to refinance debt due in April.

Chile’s Supermercados del Sur is expected to issue up to UF2.5m ($153m) in 4 tranches of local bonds today, according to a banker on the deal. The retailer is expected to offer a 4.10% 2015 UF-denominated piece, a 7.20% 2015 CLP-denominated portion, a 4.30% 2020 UF portion and a 4.70% 2028 UF piece. LarrainVial is leading the sale, rated BBB+/A on a national scale.

Montes del Plata, a joint venture between Finland’s Stora Enso and Chile’s Arauco, will build a $1.9bn pulp mill in Uruguay. The new mill is expected to produce 1.3m tons of pulp per year and be fully operational by the end of Q1 2013, Stora Enso says. Stora Enso and Arauco will each take a 50% stake in the mill. Around 40% of the project will be funded through equity, with the rest coming from loans raised by Montes Plata. Arauco is expected to fund its stake with proceeds from previous bond issues. Negotiations for the loans are taking place with regional and international banks, as well as multilaterals and Export Credit Agencies. Details of who will provide the loans, which could be either bilateral or syndicated, are expected in March.

Chilean retailer Supermercados del Sur plans to issue up to UF2.5m ($153m) in 4 tranches of local bonds, one of which will be denominated in CLP. A 2015 will have a coupon of 4.10%, a CLP-denominated 2015 piece will have a coupon of 7.20%, a 2020 piece will have a coupon of 4.30% and a 2028 piece will pay 4.70%. A banker off the deal explains that this issue could be compared to that of other BBB+ issuers such as construction company Salfacorp, although Salfacorp is a better-known credit. In September, Salfacorp issued UF2m ($86m) including a UF1m 5-year paying a 3.25% coupon priced at 98.65 to yield 3.47%, or 104bp over BCU-5. A UF1m 21-year (9.1-year duration) piece meanwhile priced with a 4.00% coupon at 99.56 to yield 4.00%, an 80bp spread over BCU-20 (11-12-year duration), or 120bp over BCU-10 (8.0-8.5-year duration). The Supermercados issue is expected to happen January 19. LarrainVial is leading the sale.

Chile’s central bank kept its rate unchanged at 3.25%, surprising the market, which widely expected a 25bp hike. The bank says that demand and employment continue evolving positively, in line with projections. Celfin, one of the banks that had predicted a pause, says inflation pressures are not yet present in the economy and that a pause supports the effectiveness of the recent currency intervention by the central bank. JPMorgan expects Chile to hike at the next meeting and retains its expectation of continued monetary tightening toward neutrality through year-end amid strong economic activity and accelerating inflation. Credit Suisse, which was expecting a hike, sees the rate hitting 5.00% by year-end.

Investors note resistance to a $500m 2018 from Chile’s CMPC, which priced Thursday flat to guidance on tepid demand. “The market has been picky in terms of yield, especially with investment grade issuers, due to concerns about US treasury selloffs if interest rates rise,” Diego Torres, corporate debt analyst at Santiago-based Munita, Cruzat y Claro, tells LatinFinance. The buyside says the book was slow to build at the initial whispers. It eventually grew to $1.1bn, according to a banker on the deal. CMPC, a forestry and paper company, whispered UST plus low 200bp Thursday morning, before announcing 220bp area guidance. The Baa2/BBB+ 2018 priced a 4.75% coupon at 99.524 to yield 4.831%, or UST plus 220bp. “With the 2019 trading just inside 200bp, I don’t see much of a pickup on the new bond,” says a London-based EM investor. The bond rose 0.25 points Thursday, according to a trader. The deal follows an issue from fellow Chilean investment-grade Cencosud that was well-bid (a $2.6bn book, the bankers say) despite being tightly-priced at UST+ 230bp to yield 5.661%. Cencosud, which raised a $750m 10-year Wednesday, finished up flat to 0.25 points. Torres says the CMPC bonds could tighten another 10bp, based on CMPC’s 2019 trading to yield around UST+190bp. Citi, Itau, JPMorgan managed the CMPC sale, anticipated ever since the firm met investors last year. It is the issuer’s first bond since a $500m 2019 sale in 2009. With at least 6 credits meeting investors next week, it is shaping up to be a busy January, at least for corporate issuers. “Investors are clamoring for new names,” says a DCM banker. He adds that the number of deals is not stoking fears of saturation, as most are likely to be for $500m or less. “Investors are being choosy with yield, but if they look at their cash positions, they will see they need paper,” says another DCM banker.

Chile’s Cencosud has raised $750m in new 2021 bonds, marking its dollar debut. The Baa3/BBB minus Chilean supermarket chain decided to play it safe in its first cross-border deal. It had been heard initially considering up to $1bn size and mulling a global peso tranche. The bond priced at 98.783 with a 5.500% coupon, to yield 5.661%, or UST plus 230.0bp, the tight end of 237.5bp guidance but wide to the 225.0bp it had first whispered. Demand for the deal reached $2.6bn, according to bankers on it. It traded up slightly Wednesday afternoon, according to investors. The enthusiasm to be expected for an investment-grade Chilean dollar debutant appeared to be somewhat dampened by concerns about ambitions capex, high leverage (3.3x, estimates Barclays) and 30% Argentine exposure, investors say. However, they see the bond as fairly priced, with little potential for tightening. “We see 20bp-30bp of upside potential from issuance levels,” says Barclays. The bank compares Cencosud to US BBBs Kroger and Safeway, which trade at UST plus 110bp and 135bp, respectively, and notes that the Chilean sovereign is UST plus 70bp. “The [230bp] level is fair, but not a compelling price,” says a West Coast EM investor who looked at the deal. He notes elevated leverage and questions about expansion plans, but sees room for 15bp-20bp tightening. Proceeds are marked for debt refinancing and general corporate purposes. Deutsche, JPMorgan and Santander ran the sale, done at the Cencosud SA holdco level, and guaranteed by the Chilean Cencosud Retail SA operating company. Cencosud operates 667 stores in Chile, Argentina, Brazil, Peru, Colombia. This includes Chile’s Jumbo and Santa Isabel supermarkets, and Brazil’s Bretas, acquired in October for BRL1.35bn.

Chilean retailer Falabella has beefed up its 2011-2015 investment budget to $3.5bn from $1.0bn. The retailer plans to build 215 stores and add 16 shopping malls, ending the year 2015 with 457 stores and 35 malls in Chile, Colombia and Peru. “This is positive news for the company as it strengthens its expected growth for the next 5 years, which we think could help increase its share price,” says local brokerage Bice Inversiones. BCI increased Falabella’s price target for the end of 2011 to CLP6,150 from CLP5,850. Falabella’s shares were up 0.30%, closing Tuesday at CLP5,027 locally.

Cencosud is set to price a new 2021 bond as soon as today, having given guidance of UST plus 237.5bp area, according to investors. The Chilean retailer, making its dollar debut, is expected to issue up to $1bn, and was heard having built a book of about $2bn late Tuesday. There were no indications of a global-peso tranche, a possibility heard considered earlier in its roadshow. Cencosud completed investor meetings Tuesday, managed by Deutsche, JPMorgan and Santander. “This is a story on domestic growth in LatAm, and specifically entry into Brazil,” says an East Coast-based EM investor eyeing the deal. There are no direct comps, investors say, though some point to other recent Chilean triple Bs, such as Baa2/BBB/BBB+ Arauco. The pulp maker got UST plus 245bp in September on a $400m 10-year, and now trades at around UST plus 155bp.

Santander plans to sell up to 3.60bn shares in Santander Chile, or about $310m, it says in a regulatory filing. The shares will be sold by Teatinos Siglo XXI Inversiones, one of 2 holding vehicles through which Santander controls the Chilean unit. The sale is consistent with the Spanish bank’s long-term aim to reduce its holding in the Chile unit to about 75%, says a bank spokesman. Santander currently holds 76.9%, with 41.5% through Teatinos and 35.5% through Santander Chile Holding. The sale of the shares is likely to be conducted over time as interest arises, the spokesman says. No outside banks have been hired in connection with it. Santander’s Chile shares closed Monday at CLP40.91.