Brazilian credit card payment processor Cielo has raised $875m in the debt capital markets, in a sale that saw the low yield and high demand that has become commonplace this year among LatAm’s blue chip issuers. Orders for the 2022 bond were heard reaching $6.5bn, with investors drawn to a BBB+/Baa2 rating, strong market share, and part ownership by Banco do Brasil (28.65%) and Bradesco (28.65%), to generate interest at initial mid UST+200bp-area whispers, before bringing pricing to a final UST+225bp. “This is a consumption growth story with strong share ownership by Banco do Brasil and Bradesco and minimum credit card risk. Cielo is growing quickly and has a huge market share and growth potential,” says a participating London-based portfolio manager. The senior unsecured bond priced at 99.316 with a 3.750% coupon to yield 3.833%, or UST+225bp, the tight end of UST+235bp (+/-10bp) guidance. The bonds were trading flat to up 0.05 in the grey late Friday, according to investors. While difficult to comp – closest peer Redecard does not have outstanding dollar debt – investors looked at shareholder Banco do Brasil’s 3.875% 2022 senior unsecured bonds as a reference point. “Cielo has declining margins and whatever they are doing now is to protect their market share,” says a London-based investor who found the UST+225bp level too tight. Another concern for some investors was Cielo’s dividend policy, at a minimum of 50% of net income, with Cielo seen distributing dividends of about 70% of net income in 2011. While changes in the competitive landscape since July 2010 have pressured Cielo’s adjusted EBITDA margin – 63.5% as of September, from 67.2% in 2010 – margins are still attractive and should remain around 63% in the near term, according to a credit analyst following the issuer. Cielo’s estimated market share is 55%, and along with Redecard the two account for more than 95%. With smaller players like Santander’s GetNet entering the market among others expected to take 1
Category: Bonds
Findeter Issues COP Bonds
Colombian state-owned development finance agency Findeter has issued COP289.7bn ($160m) the Colombian domestic bond market, through a 3-tranche deal that saw nearly COP446bn in total demand. It sold COP99.7bn in 2014 bonds at DTF+1.27%, COP91.5bn in 2016s at DTF+1.55%, and COP98.5bn in 2018s at DTF+1.71%. Findeter managed the sale itself, rated AAA on a national scale.
Mexican Hotel Operator Targets $225m
Mexican hotel operator Grupo Posadas is preparing to issue $225m in 2017 senior notes, according to ratings agencies, as part of a liability management operation. The Mexican hotel operator is scheduled to finish a US and European roadshow Wednesday, with pricing of the new B2/B+ bond expected to follow. Posadas has launched a tender targeting the $200m outstanding in 9.250% 2015 bonds. It is offering holders $1,045 per $1,000 principal before a November 14 early deadline, and $1,015 through the final November 29 deadline. Bank of America Merrill Lynch and JPMorgan are handling the tender, and are joined by Citi, Deutsche Bank and Santander on the new issue. Moody’s B2 mark represents an upgrade from B3, and follows a similar move in October by Fitch.
YPF Sells Bonds, Petersen Forfeits Shares
Argentina’s state-controlled energy company YPF has raised ARP750m ($157m) through the sale of domestic bonds, it says. The 2017 notes pay Badlar+425bp. It does not name the bookrunners. Separately, Argentina’s Petersen Group has forfeited 5.38% of YPF to Spain’s Repsol, YPF says, as a penalty for failing to make payments on loans. Earlier this year, Repsol accepted 21.2m YPF shares from Argentina’s Petersen Group in lieu of payment for a loan. The Argentine government’s expropriation of a 51% stake in YPF out of Repsol’s 57.4% in May and an adjustment of YPF’s dividend policies left the Petersen Group without means to pay back loans it had taken out in 2008 and 2011 to gain a 25.5% stake in YPF.
Veracruz Returns for Local Securitization
Veracruz has returned to Mexico’s domestic bond market, addressing a small bit of its refinancing needs with a MXP4.86bn ($369m) three-tranche securitization of future federal payment flows. Though the issuer raised less than it could have, bankers and other states are hopeful the transaction signals a reopening for sub-sovereign entities to issue in the local market. A MXP1.86bn 2027 fixed-rate peso-denominated tranche with an 11-year average life pays 8.90%, or Mbonos+300bp. A MXP700m 2027 floating rate peso-denominated tranche with an 11-year average life pays TIIE+200bp. A MXP2.3bn 2037 UDI-denominated tranche with a 19-year average life pays 5.80%, or UDIbonos+365bp. The long tranche was the only one of the three that hit the MXP2.3bn limit set for each tranche. Demand ranged from 1.22x-1.25x for each tranche, with Afores, pension funds, insurance companies and bank trading desks driving demand. “The deal shows appetite for sub-sovereign risk in Mexico from institutional investors, but one cannot fail to note that investors are clearly cautious and requiring to get paid to take on the risk,” says a credit analyst following the transaction. The bonds feature covenants that limit debt, and a guarantee from development bank Banobras for up to 45% of each tranche. Proceeds will be used towards the state’s MXP30bn refinancing plan, as it seeks to refinance liabilities and improve its debt profile. Banamex, Banorte-Ixe and BBVA Bancomer managed the deal, rated AA/AA+ on a national scale and the first of its type since the state of Oaxaca priced a MXP1.95bn 15-year Banobras-backed bond in December 2011. Last year, the state’s congress approved the restructuring of MXN 12.6bn in outstanding debt and the issuing of MXN 17.4bn, following several years of poor financial performance.
BR Properties Plots Debenture
BR Properties plans to return to the local bond market, it says, targeting BRL500m ($245m). The real estate manager’s 2014 debenture should pay DI+0.71%. Proceeds will go to repay debt. Banco do Brasil, Bradesco, BTG Pactual and HSBC are managing the sale, to be done under the rule 476 restricted format. The sale follows a BRL600m raise in July in the broader rule 400 market, including a 2017 tranche paying the DI+1.08% and an inflation-linked 2019 at 5.85%.
CFR Issues Tight Debut
CFR has issued UF3m ($142) in domestic bonds, in the Chilean pharmaceutical company’s first-ever debt sale. A 2033 bond with a 10-year grace period priced at 100.43, with a coupon of 4.00% to yield 3.96%, or 136bp wide to government bonds. The yield was lower than expected, says a source familiar with the deal, who adds that the transaction also demonstrated demand for long-dated corporate paper. The order book reached about UF5m. Proceeds could be used for M&A activity. IMTrust and Santander managed the transaction, rated A+/A on a national scale.
Cielo Tightens Price Talk
Cielo is heard aiming for a yield of UST+235bp (+/-10bp), revised from mid UST+200bp-area, for a new $875m 10-year bond, according to investors. The Brazilian credit card payment processor was scheduled to complete a roadshow Thursday and price the debut international bond as soon as today. Proceeds are expected to be used to fund the acquisition of US payment processor Merchant e-Solutions. Banco do Brasil, Bradesco and Goldman Sachs are managing the deal, rated BBB+/Baa2.
IIC Prices FRN
Inter-American Investment Corporation (IIC) emerged Thursday with a $350m 2015 floating-rate bond. The transaction was upsized from $300m, and priced at par with a coupon of 3-month Libor+35bp, tight to 40bp-area price talk. Daiwa, Deutsche Bank, JPMorgan and Mizuho led the Aaa2/AA/AAA rated RegS transaction. IIC is part of the Inter-American Development Bank.
Ultrapar Unit Readies Local Bond
Ipiranga Produtos de Petroleo is preparing to sell BRL600m ($294m) in Brazil’s local bond market, parent Ultrapar says. The 5-year debenture should pay 107.9% of the DI. The fuel distributor is looking to raise funds to repay debt. Bradesco is managing the sale, to be done under the rule 476 restricted format.