Costa Rica is looking to place its first international bond since 2004, most likely a $500m 10-year, though it could be authorized to issue up to $1bn. “It could take about 30 days for congress to approve issuance of debt. We could come to market in a few months,” says Luis Lieberman, Costa Rica’s vice president. The Baa3/BB+/BB+ sovereign awaits the green light from legislators for the issuance of $4bn in dollar debt over the next 10 years. Once approved, the sovereign is expected to start the RFP process. It is thought that Guatemala’s recent $700m 2022 bond issue can be used as a comp. Last month, Guatemala priced a $700m 10-year to yield 5.875%. Considered a better credit than Guatemala, it is thought Costa Rica could print inside the 5.875% level, pricing as tight at 5.5% say market participants. Costa Rica is looking to lower its government deficit to 0% of GDP in the next 3-4 years, and is turning to low interest rates in the international debt market as one avenue to do that. It has $250m coming due in March 2013. Panelists at EMTA’s Third Annual Central American & Caribbean Forum in New York say Costa Rica represents a growth story. It boasts 4%-5% annual growth, while several other Central American and Caribbean nations are expected to see 0%-2% growth rates, as well as and rising debt to GDP levels. “Costa Rica stands out as an outlier in the region. So Mr. Vice President, when thinking about your deal, think long term investors that want to grow exposure in Emerging Markets. Think about working with more than one dealer and issue a benchmark size issue,” says Katherine Renfrew, managing director at TIAA-Cref. “When issuing in the international capital markets, issuing a benchmark size is attractive,” adds Sean Newman, portfolio manager at GE Asset Management.
Category: Bonds
Holcim Prices MXP Sale
The Mexican unit of Switzerland’s Holcim has issued MXP2.5bn ($179m) in fixed and floating rate bonds in the domestic market. A MXP800m 2016 bond came at TIIE+67bp, and a MXP1.7bn, 2019 priced at a fixed rate of 7.0%, or Mbonos+170bp. The deal saw demand of MXP3.8bn, according to people familiar with the sale. The longer tenor drew demand from pension funds and insurance companies, and the shorter tenor attracted mutual funds, insurance companies, banks and retail investors. Proceeds are to be used to refinance the cement maker’s debt. Banamex, BBVA, and Santander handled the transaction, rated AAA on a national scale. Today, Mexico’s Volkswagen Bank plans to sell MXP1bn ($71m) in domestic 2016 bonds, expected at around TIIE+40bp area.
BdB Upsizes Tier 2
In what is turning out to be a decent week for debt issuance, Banco do Brasil (BdB) has raised $750m in subordinated Tier 2 bonds, taking advantage of a window ahead of a possible volatility in the market. The issuer upsized from a benchmark size after getting $2bn in demand for a deal thought to be motivated by reverse inquiry. The state-controlled bank priced the 2023 at 99.023, with a 5.875% coupon, to yield 6%, or UST +434.1bp, inside of 6.00%-6.125% guidance. The bonds were trading up 0.25 in the grey Tuesday afternoon. “Accounts have money to put to work and are willing to invest in high quality names such as Banco do Brasil and Embraer,” notes an EM investor, mentioning another Brazilian that popped up to raise funds Tuesday. Leads were heard pinning a 15bp-20bp concession against its 2022, looking at a 5.67% yield and adding 6bp for the extension of the curve. The deal represents the first bank capital raised in the dollar markets in a few months, and one of very few bank capital transactions seen globally, according to bankers following the process. North American accounts took 43% of the book, EMEA 37%, and Asia 7%, with the rest allocated to Latin America, according to a source with knowledge of the sale. Fund managers took 32%, private banking 29%, banks and financial institutions 24%, pension and insurance 3% and hedge funds 11%, with 1% allocated to other type of investor. Banco do Brasil, HSBC and Standard Chartered managed the transaction, rated BB+. Banco do Brasil last visited the market in February, making a $750m opportunistic retap of its outstanding 9.25% Tier 1 NC11 Basel III compliant perpetual bonds. It reopened at 108.50 to yield 8.488%. The bank is heard to now turn its attention to the Yen market as the RFP deadline for a possible Yen closed on Monday.
Caribbean Development Bank Cut
S&P has lowered the credit rating of the Caribbean Development Bank’s to AA+ from AAA, as its risk management has weakened. “CDB has failed to comply with one of its internal liquidity policy guidelines, and borrower concentration remains high,” the agency says. S&P expects that the bank’s financial profile will remain stable, with new capital subscriptions offsetting lower profitability seen this past year and that it will remain so in the near future. The outlook is stable.
Embraer Draws a Crowd
Brazil’s Embraer emerged Tuesday to raise $500m through a new 2022 bond. Demand reached more than $3.7bn, according to investors, who were drawn to scarcity value and a strong investment grade credit. The aircraft manufacturer priced the notes at par with a 5.15% coupon, at the tight end of 5.20%-area (+/- 5bp) guidance, revised from 5.375%-area. The bond was heard trading up to about +0.50 to +0.75 in the grey Tuesday afternoon, according to a trader. A 5.15% yield represents a concession of close to 30bp to Embraer’s existing 2020 bonds, according to a banker familiar who spotted the notes at 4.60% pre-announcement and added 25bp for the curve extension. Proceeds will be used to repay short-term debt, and for general corporate purposes including the funding of working capital for production ramp-up on certain programs, according to Moody’s which assigns a Baa3 rating to Embraer’s senior unsecured notes. Citi, Itau, Morgan Stanley managed the BBB minus/Baa3 deal.
Fibria Launches Tender
Fibria Celulose has launched a liability management targeting up to $500m of its 7.5% 2020 bonds, it says. In the cash offer, the pulp and paper producer is offering holders a clearing price to be determined through a modified Dutch auction process. Each holder that tenders notes will specify a bid price within the $1,000-$1,060 bid range, which represents the minimum consideration such holder is willing to receive per $1,000 principal tendered. The total consideration includes an early tender payment of $50 for each $1,000 tendered before June 22. The tender expires July 9. The offer is conditioned on Fibria getting acceptance from holders of at least $400m. Deutsche Bank and Citigroup are managing the offer. There is about $1.87bn outstanding in the 2020 bonds.
Holcim Set for MXP Bond
The Mexican unit of Switzerland’s Holcim is scheduled to issue today up to MXP3bn ($217m) in the domestic bond market. The guaranteed notes can be divided between 5-year floating rate and 10-year fixed rate tranches. The issuer is said to be looking at TIIE+65bp-75bp for the floating portion, and perhaps Mbonos+170bp-180bp for the fixed. Proceeds are to be used to refinance the cement maker’s debt. Banamex, BBVA, and Santander are handling the transaction, rated AAA on a national scale. Penoles had also been considering today for a $200m-$240m in 10-year dollar-denominated domestic sale. The deal through Banamex, BBVA Bancomer and Santander is expected next week.
Mabe Gets 65% of Tender
Controladora Mabe has received acceptance from holders of $131m, or 65.45%, of its 2015 bonds in a tender offer, as of the June 11 final deadline, it says. The Mexican white goods manufacturer’s acceptance rate was only slightly higher than what it had at the May 29 early acceptance date, at which it extended the early deadline to match the June 11 final deadline. Mabe offered to exchange the 6.5% 2015 bonds for new reopened 7.875% 2019s. It is offering $1,000 in the new bonds for each $1,000 tendered of the 2015s. Bank of America Merrill Lynch managed the process. The 2015 bonds were sold in 2005 for $200m. The 2019s to be reopened in the operation were originally sold in 2009, for $350m, through BAML and HSBC.
Retailer Plans Debenture
Lojas Renner is preparing to raise BRL300m ($145m)in the domestic bond market it says. The issue will be divided into a 2018 tranche paying the DI plus up to 1.05%, and a 2019 inflation-linked tranche paying up to 6.25%. Each portion would amortize in three equal parts in each of the final three years. A 15% upsizing is possible. The retailer is raising funds to improve its capital structure. Itau and HSBC are managing. Renner is rated AA+ on a national scale.
Auto Lender Nears Domestic Bond
Mexico’s Volkswagen Bank is preparing to raise MXP1bn ($71m) in the domestic bond market on June 14. The 2016 bond would pay a spread to the TIIE rate. Proceeds are marked for the bank’s operating needs. Banamex and Ixe are managing the sale, rated AAA on a national scale. The bank sold MXP 1bn in 3-year domestic bonds in December, at TIIE+50bp.