Concessionaria Rodovias do Tiete has pushed back the pricing of its BRL650m ($320m) debenture sale until at least next week, according to investors following the process. The toll road operator’s inflation-linked 2024 bond is secured by the pledge of Tiete’s equity, future receivables of its toll revenues and indemnification rights over concession assets. It is looking to pay a fixed rate of up to 8.75%. The bond has been touted as the first to take advantage of a program offering tax incentives to buyers of infrastructure-related bonds, and is said to be marketed to both domestic and international accounts. However, investors say there is some uncertainty as to whether the bonds will fully qualify for the tax benefits, as the proceeds are use used to pay off BRL480m in short-term debt in addition to funding road capex. Barclays is managing the sale, in the bank’s first Brazilian domestic market bond, rated Aa3 on a national scale.
Category: Bonds
Santiago Metro Issues UF Bond
Chile’s Empresa de Transporte de Pasajeros Metro has issued UF1.5m ($67m) in domestic bonds, it says. The Santiago subway operator priced the 2033 bullet at 99.54, with a 3.85% coupon, to yield 3.88% or government bonds plus 121bp. It will use the proceeds to refinance existing bank debt. Santander managed the sale, rated AA+/AA on a national scale. Metro previously issued in October 2011, placing UF5.2m in 3.75% 2022 bonds at a 4.00% yield, or government bonds plus 129bp.
Brazilian to Test DCM
Brasil Foods is preparing to meet bond investors next week, becoming the region’s first credit to engage the buyside since the latest bout of Euro-driven market volatility. The meetings are initially on a non-deal basis, though the issuer is said to be revisiting a process started last year through which it was seeking funds. Expectations for new issuance have been mild since Mexico’s Banca Mifel issued May 10, as the potential borrowers await a more definitive indication of Greece’s remaining in the Eurozone. “The market is slightly more expensive, but the window is not closed. There are high-grade defensive credits getting deals done in other parts of the world,” says a New York-based DCM banker away from the deal. Rates are still low, and debt funds are still getting inflows, he adds. “There are 3 weeks until the Greek election and the markets knowing if a new government will be pro-EU. This outcome would cause liquidity to return, but we would need another 2-3 weeks until new issuance can return,” Diego Torres, corporate debt analyst at Santiago brokerage Munita, Cruzat y Claro, tells LatinFinance. Brasil Foods plans to visit London on Monday and Boston and New York on Tuesday, plus a call with US west coast investors. A recent upgrade gave Brasil Foods 3 of 3 investment-grade ratings, and the company has altered its structure through moves last year, including a regulator-mandated asset swap with Marfrig and a dairy acquisition. The company is updating investors following these changes, though, like many high-quality credits not in urgent need of funds, it is remaining ready in case a window opens. The protein exporter was heard last year looking for $750m at perhaps 10 years. Banco do Brasil, HSBC, Itau and Santander are managing the roadshow. Brasil Foods closed a $500m dollar and euro-denominated loan facility last month. Its last international bond issuance was in 2010, raising $750m at 10 years through Itau, JPMorgan and Santander.
Inbursa Raises Domestic Funds
Banco Inbursa has sold MXP4.6bn ($329m) in Mexico’s domestic bond market, according to a banker on the deal. The 3-year floating-rate note pays the TIIE+25bp. The price comes roughly in line with the market’s expectations, as it had been seen getting a similar level to Feburary’s MXP3.5bn 2015 bond, paying TIIE+20bp. The Carlos Slim-owned bank had been registered for up to MXP5bn, but had been expecting a MXP4bn sale. Proceeds will be used to fund bank operations. Actinver, BAML, Banamex and Inbursa managed the transaction, rated AAA on a national scale.
Scotia Chile Issues Bonds
Scotiabank has issued UF2m ($88m) in the Chilean local bond market, according to a source familiar with the sale. The 2022 bullet priced at 98.62, with a 3.5% coupon, to yield 3.7%, or 130bp over government bonds. Demand reached UF2.5m. Scotia managed the sale itself, rated AAA on a national scale.
US, Colombia Look to Improve ECA Relationship
The US Ex-Im Bank and Colombian state-owned development bank Bancoldex have signed an MOU to work together to facilitate trade between the 2 countries, US Ex-Im says. The pair will look to boost business in sectors including infrastructure, environmental projects, medical equipment and transportation, by expanding use of Ex-Im Bank financing by Colombian buyers of US goods and services.
Bonds Still on the Table for Colombian Generator
Colombia’s Isagen may still consider an international bond issue this year, if conditions permit, its CFO tells LatinFinance. Though the generator is not in need of funds, it would be interested in raising $500m, to have on hand to improve its capital structure and finance growth. “Rates are still very good in the international markets now. There is a lot of volatility, but there are also windows. We want to be prepared,” Juan Fernando Vasquez says. He notes they would expect to pay in the neighborhood of 6%, compared to 8% in Colombia’s domestic bond market. Isagen is maintaining contact with international investors, who show a tremendous appetite for Colombian corporate bonds, and with banks, though it has not officially hired any, he says. Isagen’s growth could come from Colombian government bidding processes to build new generation capacity, or from expansion opportunities in other LatAm markets. Exporting power to neighboring countries should be an interesting option once necessary agreements are reached, he notes. Isagen, rated BBB minus/BB+, now has about $850m in debt. Its current $2.7bn expansion plan is already financed.
Ceagro Eyes Local Financing for M&A
Grupo Los Grobo’s Ceagro do Brasil unit is considering raising up to BRL300m ($150m) in Brazil’s domestic market, through the sale of debentures or Certificados de Recebiveis Imobiliarios (CRI), CFO Antonio Oliva Neto tells LatinFinance. The grain producer needs funds to buy stakes of agriculture input retailers and to address working capital needs. Ceagro most recently announced the purchase of a 60% stake in Synagro, an inputs retailer and seller of agrochemical, fertilizer and seeds. Thus far, it has used pre-export finance facilities and internal funding for organic growth and acquisitions. An international bond has also been analyzed, but is not an option in the short-term, Oliva says, as Brazilian peers have been paying high rates of 9%-10% for dollar funding. “When you look at our peers in the market and coupons they are paying, it doesn’t make much sense,” he says. It also announced a 50-50 joint venture with Brazil’s Peninsula Fertilizante to operate a fertilizer mixing plant, Ceagro’s first investment in the segment, and the approval of construction of 2 new warehouses in the states of Mato Grosso and Tocantins. In January, Mitsubishi agreed to purchase a 20% stake in Ceagro for about JPY3.5bn ($45.61m). Ceagro focuses on financing producers, production, storage and supplying the local market, operating in Brazil, Argentina, Uruguay and Paraguay. It seeks to leverage the Mitsubishi deal to become a centralized grain originator in the countryside, and also to export grain to new destinations and make further acquisitions.
EM Corporate Risk Remains Attractive Despite Volatility
Despite European headlines, slowing Chinese growth and rising global default rates, investors searching for yield in EM debt will remain a strong driver for the asset class, analysts and investors say. Moreover, EM corporate debt should weather the medium to long-term storm. “The medium to long-term outlook for the asset class is positive and continues to attract new investors,” says Paolo Valle, portfolio manager at Federated Investors. Crossover investors and new funds are turning to EM corporates, and with a small percentage of institutional investor’s portfolios exposed to EM, there is room for growth into the asset class, he says, with overall issuer quality and low cost of funding as the main drivers. In LatAm, he prefers quasi-sovereign and high-quality names, mostly from Brazil and Mexico, as well as PDVSA. “Short term drivers of performance are Europe and China, but the trends over 5-10 years will be continued growth in the asset class,” says Anne Milne, head of global EM corporate credit research at Bank of America Merrill Lynch. She adds that issuers at the moment have diversified funding options, especially in local markets, and that many are not in desperate need of funds. Milne highlights Mexican homebuilders and protein producers like Minerva as those in LatAm with upside potential. David Masse, corporate credit analyst at Prudential, notes that EM corporates are not immune to risk-on risk-off, and recommends dealing with swings by being dynamic, with participation through different types of debt instruments. So far, the short-term troubles have had limited affect on balance sheets. There has been $9bn in EM defaults since Q3 2011, notes David Spegel, global head of EM strategy for ING, though that is only 3% of the global rate. Valle, Milne, Masse and Spegel spoke on an EMTA panel in New York Tuesday.
Inbursa Set for Pricing
Banco Inbursa plans to issue up to MXP5bn ($363m) in Mexico’s domestic bond market today, according to a banker on the deal. The 3-year floating-rate notes pay a spread to the TIIE benchmark. Proceeds will be used to fund bank operations. Actinver, BAML, Banamex and Inbursa are managing the transaction, rated AAA on a national scale. The Mexican bank last issued in February, pricing a MXP3.5bn 2014 at TIIE+20bp, and is expected to price at a similar level today.