Costa Rica’s congress has given its second and final vote in favor of issuing $4bn in bonds over a 10-year period, with a maximum of $1bn per year. In what would be its first international bond since 2004, the Baa3/BB+/BB+ sovereign is expected to kick start an RFP process ahead of issuing a benchmark size 10-year. “We expect the new bond to be issued in approximately two months; the law establishes a series of time-consuming procedures that need to be completed before the new bonds can be issued,” Nomura says in a report. Costa Rica is turning to the dollar market to tap low interest rates and ease pressure on local currency financing.
Category: Bonds
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Eletrobras Defines Domestic Jumbo
Brazil’s Eletrobras has given additional details of its planned issue of BRL2bn ($990m) in the domestic bond market, ahead of a late October pricing. It plans inflation-linked bonds divided into a 2018 tranche paying up to 6.0%, and a 2022 tranche paying up to 6.3%, according to a prospectus. The exact amount and interest rate for each will be determined during the pricing period, expected in late October. Investor presentations are scheduled to begin September 24. The proceeds are to be used for the electric company’s investment needs, and are part of a BRL4.5bn fundraising plan. BTG Pactual and Santander are managing the sale, which has not ben assigned a rating.
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EM Debt Takes in Funds
EM debt funds booked net inflows of $426m during the week ended August 22, according to EPFR. In terms of performance, the class was up 0.63% for the week ended August 23, for a year-to-date gain of 11.69%, according to Lipper. Global income funds gained 0.73% during the week, and are up 5.56% ytd. International income funds rose 1.16% during the week, for a 4.87% gain ytd.
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IB Fee Pool Seen Stable: Bankers
Investment banking revenue is down from one year ago, but not so much that catching 2011’s total fee haul is impossible. With fees charged for deals relatively stable from last year, bankers say volumes will be more of a driver for their revenue than anything, and diversification away from Brazil is becoming more and more important. A strong September and October in DCM and ECM would help the picture the most. “The only fee base that came down [this year] was ECM,” Guilherme Paes, head of investment banking at BTG Pactual, tells LatinFinance. DCM fees are the same, he says, and M&A fees are stable and still attractive. At $1.04bn through August 24, the regional revenue total from M&A, loans, ECM and DCM is down versus the $1.38bn in corresponding period in 2011, according to Dealogic. BTG led the overall league tables in the region through August 24, with $114m, or 10.9% of the total pool. The bank was also at the top of the M&A table, with $75m, and the ECM table, with $26m. In ECM, fees have been affected by a greater number of banks per transaction, as well as many deals not resulting in full fees due to lower-than-expected pricing. In lean times, local markets can also help. “DCM and M&A markets continue to be much better than last year due to the fees coming from local markets. The local markets are very strong, and always open,” Paes says. Issuance and M&A activity, and the accompanying revenues, should still be dictated by global economic conditions, and news from the US and Europe. While Brazil still accounts for most of the region’s business, bankers stress the need to diversify revenue streams away from Brazil and into growing markets including Peru, Chile, Colombia and Mexico. “The revenue base is more affected by Brazil. LatAm ex-Brazil is probably flat, but given the size of Brazil, the overall level is down,” Javier Vargas, Co-Head of Investment Banking for Latin America at Credit Suisse, tells LatinFinance. “Investors are a bit more careful about Braz
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Titularizadora Issues RMBS
Securitization specialist Titularizadora Colombiana has sold COP382bn ($211m) in RMBS in the domestic market, it says. The 2022 bonds pay a fixed rate of 6.2%, and received demand of 1.98x. Titularizadora self-led the deal, rated AAA on a national scale.
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Argie Province Looks to International Bond Market
Legislators in Argentina’s Neuquen province have authorized the issue of up to $330m in international or local bond markets, according to a finance ministry spokesperson. “The legislature approved the law on Wednesday and we anticipate meeting with banks next month as we analyze issuing in the dollar markets,” the spokesperson adds, without ruling out a domestic issuance. Neuquen is seeking funds to finance certain infrastructure projects and repay existing debt. The province last issued in the bond markets in April 2011, pricing a $260m 7.875% 2021 bond at an 8.000% yield. The resource-rich Patagonian sub-sovereign’s notes were backed by oil royalties in the deal managed internationally by Barclays and Citi, with Banco Macro and Puente Hermanos co-managing on the domestic side. Neuquen’s 2014 and 2017 bonds were trading at 7% and 10% in yield respectively Thursday, according to a trader.
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Concessionaire Hits the Road
Brazilian road operator Triangulo do Sol Auto-Estradas is scheduled to begin marketing today a BRL620m ($307m) domestic bond sale. The issuer may choose among a tranche paying the DI plus up to 3.0%, and another inflation-linked tranche paying up to 7.5%, according to a prospectus. Triangulo expects to price in the second half of October, with proceeds repaying existing debt. BTG Pactual, Bradesco, Itau and Santander are managing the sale, which has not yet been rated.
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Continental Upsizes Well-bid Bond
Peru’s BBVA Continental emerged Thursday with a $500m bond, the region’s first cross-border FIG deal in close to a month. Tapping demand ahead of the anticipated September rush, the bank upsized the sale from $500m, after getting $7bn in orders. The BBB/BBB+ Peruvian priced the 2022 at par with a 5.00% coupon, to yield at the tight end of 5.125%-area guidance, brought in from wider 5.5% whispers. The bond was trading up 1 point in the grey Thursday afternoon, according to traders. Leads saw a pre-announcement UST+338bp interpolated spread on Continental’s 2020 bonds, indicating a negative concession of as much as 8bp versus an interpolated spread of 330bp for the new 2022. Investors noted a minimum negative concession or no concession. “It priced tight to its own curve, but where else are you going to buy Peru right now?” asks an EM investor following the sale. “They had the right strategy of pricing ahead of supply in the market with good results,” says a banker away from the deal. The largest order book ever seen by the bank was boosted by managers leaving it open overnight Wednesday, resulting in greater participation from Asian accounts, which reached about 25%. US participation was roughly 30%, with about 20% from Europe and the remainder from other regions. Investor interest was robust versus Continental’s January 2012 $500m transaction, which saw only $1.8bn demand amid worries about Continental’s ties to its Spanish parent. “BBVA trades wider to other Peruvian banks because of the Spanish name, but people are starting to see through that. Given timing of the year, where cash levels are and the popularity of Peruvian trades, the deal got done,” adds another EM investor. BBVA, Bank of America Merrill Lynch and Goldman Sachs managed the sale.
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Geo Brings Mini Huaso
Mexico’s Corporacion Geo has issued UF342,000 ($16m) in the Chilean market, bringing the first so-called Huaso sale since 2010 at a smaller size than had been expected. Acting under a $100m-equivalent shelf and initially announcing UF0.5m, the Mexican homebuilder priced the 2020 at 91.40 with a 6.50% coupon, to yield 7.8%, or government paper plus 540bp. Proceeds will be used for refinancing short term debt. Santander managed the deal, rated BBB/BBB on a national scale. Geo could await another issuance window and a better rate environment to add to its Chilean issuance, according to sources familiar with the company’s plans. It remains to be seen how the deal could affect other foreigners planning to tap Chile’s domestic market. Brazil’s Banco Pine is working on a 10-year UF6m program, and has an A minus Chilean-scale rating. Celfin and JPMorgan are advising. BTG Pactual has also been heard talking with investors about the possibility. Previously, only Mexico’s America Movil and Peru’s BCP had executed Huaso deals.
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BBVA Continental Aims for Bond Issue
Peru’s BBVA Continental is heard whispering 5.5%-area yield for a new $400m 2022 bond expected to price as soon as today, according to a person familiar with the process. The BBB/BBB+ lender is scheduled to wrap up investor meetings in Europe today after visiting Latin America and the US, and is heard having generated $1.5bn in interest. The decision to approach the market during the usually inactive second half of August is said to be based on a strategy of beating an expected rush of issuers in the first week of September, and justified by the strong demand seen so far. The price whispers compare to respective 3.7% and 4.8% yield levels seen on Continental’s 2017 and 2020 bonds Wednesday, according to a trader. The sale, coming under an $800m authorization given in June, would allow Continental to match assets with liabilities and diversify its funding base. BBVA, Bank of America Merrill Lynch and Goldman Sachs are managing the process. Continental’s last visit to the debt capital market was a $500m sale in January, pricing at par to yield 5.75%, with BBVA, Goldman Sachs and JPMorgan managing.