Brazil’s Votorantim has wrapped up fixed-income meetings via JPMorgan with no talk of any possible bond deal, say market participants. The industrial group, rated BBB/Baa3/BBB-, would be a prime candidate for a market foray given its blue-chip status, though the company and its subsidiaries have already raised their fair share in the capital markets. In August, the industrial group managed to broadly syndicate a multi-tranche $2.65bn loan and lock in attractive pricing before windows began to close on the back of European debt woes and higher funding costs. The group’s companies were also responsible for several bond deals earlier this year, including a BRL1bn 5-year issue from Banco Votorantim in May and a $500m 5-year in April, as well as a $750m 2041 from Votorantim Cimentos. The parent’s 2021 bonds were trading at 101.25-102.25 or 6.6% on a yield basis Thursday afternoon.
Category: Bonds
CAF Returns to Swiss Market
Regional development bank CAF became the sole LatAm issuer to tap the international markets Thursday when it raised CHF125m ($139m) in the Swiss franc market. Upsized from an initial target of CHF100m, the long 5-year bond came at a reoffer price of 100.264 with a 2.75% coupon to yield 2.697% or mid-swaps plus 185bp. CAF has become a frequent issue in this niche market. In January, it reopened its 2.625% of 2015s to raise CHF130m. At the time, the borrower said that pricing came inside its dollar curve after it retapped the bond at 99.791 to yield 2.774%, or mid-swaps plus 140bp.
Colombian DCM Keeps Moving
Colombian bond markets continue to be open for business following the COP180bn ($95m) sale from power transmission from Transleca, with Findeter and UNE also preparing issuances. Transleca this week placed COP80bn in 2021 bonds at IPC+4.2% and COP100bn in 2026s at IPC+4.48%. Correval managed the sale, rated AAA on a national scale. Proceeds are marked for debt management and for working capital. State-owned development finance agency Findeter also plans to sell up to COP200bn, with a tentative pricing date of October 25. The bank wants to issue 2 and 3-year bonds paying spreads to the interbank rate IBR, and 5-year notes paying a spread to the IPC. As with previous issuance, the AAA national-scale issuer is structuring and coordinating the issue itself, aided by several local brokerages. Empresas Publicas de Medellin-owned telecom UNE is also hoping to revive a COP300bn sale postponed from the end of September, with timing slated for next week depending on market conditions.
Arca Continental Prices MXP Bond
Arca Continental raised MXP3bn ($226m) in the Mexican bond market Wednesday. The bottler priced a MXP2bn 10-year fixed rate bond at 7.63%, or Mbonos +130bp and a MXP1bn 5-year floater at TIIE+ 25bp. Pension funds took part in the fixed-rate deal while private banking and investment funds participated in the floater. BBVA Bancomer, Bank of America Merrill Lynch and HSBC managed the deal, rated AAA on a local scale. The issuer last came to the Mexican domestic market in November 2010, when it priced a MXP3.5bn fixed and floating rate deal via HSBC. On that occasion, the borrower paid TIIE + 29bp on a 5-year and Mbonos +114bp on a fixed-rate 10-year.
Banco de Chile Heads to Mexican DCM
Banco de Chile has filed a shelf to issue up to MXP 10bn ($752m) of debt in the local Mexican market. Banco de Chile will be the third Chilean issuer to tap the Mexican domestic market following similar moves by Banco de Credito e Inversiones (BCI) and Chilean miner Molymet. “Chilean issuers are turning to the Mexican market because it is attractive and offers an alternative for issuers to finance themselves,” says a banker managing the sale. Banamex and JPMorgan are leads. Timing and tenor have yet to be determined.
Banobras to Issue MXP
Mexico’s Banobras plans to issue bonds in the Mexican domestic market via Bank of America Merrill Lynch and Banamex. Details on issuance date, size and tenor have not yet been determined. Banobras last issued in the local market in 2010, when it sold MXP7bn in 4-year bonds after generating some MXP19bn in demand. Banamex led its last deal, rated Aaa on a national scale by Moody’s. Banobras provides financing for states and municipalities, particularly for infrastructure projects.
BCP Tender Sees Strong Early Response
Banco de Credito Del Peru (BCP) has received commitments from creditors holding $114.4m of outstanding 6.95% 2021s to exchange these bonds for recently issued 6.875% 2026 fixed-to-floating rate notes. There are $120m of outstanding 2021s. Accepting holders get $1,078.38 worth of new bonds per $1,000 of the old ones, including a $30 early acceptance premium. Remaining holders have until October 24 to swap at $1,048.38. Creditors have also agreed to waive a provision in the original notes that keeps BCP from accepting more than $70m worth of bonds in such an offer. The new notes are the same as those offered on September 8, in a $350m sale. The NC10 bonds pay a fixed coupon and switch to a rate of Libor+7.708% per year after year 10. Bank of America Merrill Lynch and Morgan Stanley ran the initial sale and are also managing the exchange offer. The 2021 notes were originally issued in 2006.
DCM Bankers Cry Foul over Fees
Fees charged for LatAm cross-border bond deals are reaching ridiculously low levels, even for a region long-known for borrowers that squeeze leads to the last cent, say DCM bankers. Central American sovereigns have traditionally received the brunt of such complaints, but recent mandates from quasi-sovereign names in Brazil are driving fees ever lower, they say. Mandates for Eletrobras, Banco do Brasil and Taesa are thought to have been won with single digits. “Federally owned entities have to show they got a fair rate from the market so one of the competing criteria is the lowest all-in costs,” says one senior banker. “Bankers are showing 1bp which they have to share between 4 or 5 banks.” The increasing number of banks doing business in LatAm certainly has exacerbated the problem, especially with the recent entrance of large Brazilian commercial banks that have traditionally stayed away from capital markets business. It is hardly worth the time and effort to respond to an RFP sent to 15 banks, say some. This comes at a time when financial institutions are shedding jobs and as bankers come under pressure to show a pipeline as year-end approaches amid a lull in new issuance activity. If banks are not being compensated for their efforts they will do little to support the issuer and the bonds they bring to market, especially during tough times. “Investors don’t like it because there is no support in the secondary,” says another senior DCM banker “You don’t have to go to equity fees of 2-3%. If it is 40, 50 or 60bp you can making a living, but at zero or 1bp it doesn’t make sense. It is getting worse.”
Pemex Breaks DCM Silence
Pemex emerged Wednesday with the region’s first cross-border bond sale in more than a month, making an opportunistic retap of its 6.5% 2041 that allowed it to raise $1.25bn. Supported by some $300m in reverse-enquiry demand, the state-owned oil producer sallied forth Wednesday morning with what it described as a benchmark-sized trade and whispers in the plus 325bp area. The 35bp spread concession against the bonds 290bp opening level was seen as attractive and generated sufficient interest to build a book that breached the $5bn mark. All this meant that the borrower could upsize from its original benchmark level and price at the tight end of the UST+320bp (+/-5bp) guidance, or at 102.131 to yield 6.339%. “The retap comes at 140bp spread over the sovereign and represents fair pricing and offers some value,” notes a participating investor. BNP Paribas and Deutsche Bank managed the 144a/RegS deal, which is rated Baa1/BBB. Barclays and Natixis came in as co-managers.
Windows Open for High-Grade Credits
Windows could be opening for LatAm borrowers after Mexico’s state-owned oil company Pemex broke a month-long lull in international bond issuance activity for the region, say bankers. Better overall market tone and a relatively active US high-grade market are further reasons for optimism. “I was expecting the market to reopen soon. Pemex is the type of name we would expect to reopen the market,” says one DCM banker. This comes after what had been the slowest September since the global financial crisis in 2008 as uncertainty over the outcome of Europe’s debt crisis has left markets far too volatile for issuance. Last month saw just three cross-border deals out of LatAm. Peruvian bank BCP priced $350m in 15NC10 subordinated Tier2 bonds, Chile issued $1bn in 2021 bonds and Argentina’s Cresud sold $60m in 3-year bonds: The fact that Pemex (Baa1/BBB/BBB} generated some $5bn in demand yesterday for a $1.25bn retap of its 2021 underscored the pent-up appetite that exists for certain credits, even if they have to pay higher premiums. “It gives issuers the confidence that the money is out there and that the market is what it is in terms of new issue concession,” says one banker. “Pemex’s new issue concession is a good data point people can rally around if equity markets improve.” Increased activity in the US high-grade market is also a good leading indicator for issuance opportunities out of LatAm. As evidence of this, bankers cite several deals from triple B names, including BAE Systems (Baa2), American Tower (Baa3/BB+), and Nordstrom (Baa1/A-). “The market is definitely firmer than a few weeks ago,” says one investor. The story for junk credits is very different, however. “High-yield names are still under water, and even if they wanted to issue, why do it at 14-15%? At that level it reeks of desperation,” says a syndicate official. Either way, bankers are not predicting a rush of LatAm borrowers in coming weeks, partly because numbers will start going stale soon and they ca