For the week ended September 7, EM bonds registered net inflows of $684m, with local currency funds accounting for $212m of that, according to EPFR Global. Meanwhile, Lipper data show that in the week ended September 8, EM debt funds lost 0.54%, but are still up 5.74% year-to-date. Global income funds lost 0.11% in the week, but have earned 5.15% ytd. It is a similar story for international income funds, which lost 0.75% in the week, but earned 6.42% ytd.
Category: Bonds
Posted inDaily Brief
Odebrecht Eyes 30-Year
Brazil’s Construtora Norberto Odebrecht was heard considering a 30-year bond as it wrapped up fixed-investor meetings last week with Credit Suisse, Deutsche Bank and Goldman Sachs. The Baa3/BBB minus issuer is keeping an eye on the market and expects to issue as soon as this week, market conditions permitting. “There is plenty of interest but everything is about yield [and timing] at this stage,” says a person familiar with the transaction. Size has yet to be determined. Brazil’s Braskem was the last corporate to issue a 30-year in July, when it priced a bond at 98.479 with a 7.125% coupon to yield 7.25% or 308.1bp over UST. “Issuing a 30-year may be difficult in the current market as investors are staying closer to more liquid 5 and 10-year bonds,” says a senior portfolio manager following the name. The investor adds with 30-year USTs near historical lows it makes sense from the issuer’s perspective to lock in longer-term financing at lower rates. Odebrecht last came to market in March 2011 when it issued a $500m bond via Bank of America Merrill Lynch and HSBC.
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BCP Draws a Crowd
Banco de Credito del Peru (BCP) priced Thursday a $350m 15NC10 subordinated Tier 2 bond (Baa3/BBB) at par to yield 6.875% or UST+489.5bp, coming in line with earlier guidance and at the tight end of low 7 whispers. With BCP’s senior bonds due 2020 trading at 5.5%-5.7%, sub 7 was considered too tight for some and barely sufficient to provide a new issue premium, “This deal came in too tight,” says a LatAm credit analyst. The book shrunk to around $700m from $1bn once leads squeezed whispers lower and some investors declined to participate, but the bond nevertheless jumped on the break and traded up half a point up from reoffer late Thursday afternoon. Leads were heard talking about a final new issue premium of 17bp, in line with the senior to subordinate spread on Brazilian banking names. Bankers say windows are open for investment grade credits like Chile, which sold $1.35bn worth of bonds Wednesday, and Peruvian corporates like BCP. “Peru is very much in the sweet spot for the market right now and with the [Peru] sovereign at investment grade; these are the types of issuers that should be reopening the market, “notes a syndicate manager away from the deal. Bank of America Merrill Lynch and Morgan Stanley led.
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BT Gets BRL1bn at Sub-10%
Telemar’s Brasil Telecom (BT) priced a BRL1.1bn ($662m) 5-year bond Thursday after building a book that reached BRL2bn in size. The telecom was heard seeing some resistance below the 10% whispers circulated in the market, but it nevertheless managed to squeeze guidance to 9.875% area before pricing at 99.516 with a coupon of 9.75% yield of 9.875%. The result may bode well for an asset class that bankers says holds much promise if, like BT, the borrower can issue in size and provide the liquidity investors seek in this uncertain environment. Accounts were largely comping against Companhia de Eletricidade do Estado da Bahia (Coelba)’s BRL 400m 2016 bond and McDonalds franchisee Arcos Dorados’s BRL400m 5-year, which were respectively at around 10.06% and 10%. Banco Safra, the most recent borrower to tap BRL globals, also had its bond being quoted around 10.20% yield. “Around the 10% area is in the right zip code,” says an investor looking at the name. The deal was brought to market via Bank of America Merrill Lynch, Citi, Deutsche Bank, HSBC, Itau and Morgan Stanley. A subsidiary of Telemar Norte Leste S.A. (Baa2/BBB minus/BBB), the company is rated Baa2/BBB. Telemar last tapped the overseas market in December 2010, when it pulled the trigger on a EUR750m 2017 bond that was priced at 98.828 with a 5.125% coupon to yield 5.33%. On that occasion HSBC, Santander, BB Securities and Espirito Santo Investment Bank acted as leads. The operator of the Oi brand also sold $1bn in 2020 bonds in September 2010. Telemar has not issued an international bond through the Brasil Telecom unit since acquiring it in 2008. The bonds will be governed under New York law and listed on the Irish Stock Exchange.
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Chile Considers 2012 Return
In an effort to keep its commitment of maintaining a regular presence in the international capital markets, Chile isn’t ruling out the possibility of more foreign bond forays in 2012 and 2013, said the country’s Finance Minister Felipe Larrain at a roundtable discussion with journalists Thursday following a $1.35bn equivalent USD and CLP issue the day before. “A 10-year is the bread and butter [and the most liquid] in this market but a 5-year and 30-year will not be ruled out,” he said. Last year, the sovereign landed a 3.89% coupon, which at the time was its lowest ever, but it beat that record on Wednesday with a 3.35% coupon on a new $1bn 10-year. Coming with an even lower coupon may be an attractive option, but Larrain hoped that the sovereign would fail in its attempts to squeeze pricing tighter as this “would mean that the world economy was in dire straits,” he added. Still, the sovereign has established an attractive pricing benchmark for its corporates to follow. “The Republic has set the benchmark and [Chilean] companies can now set terms over that benchmark,” he added. Wednesday’s issue was twice over subscribed and was led by HSBC and Deutsche Bank. Ratings were AAa3/A+/A+ (stable/positive/stable) (Moody’s/S&P/Fitch.
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Ex-BTG Pair to Join Plural
Brazilian asset management firm Plural Capital has hired ex-BTG Pactual partners Evandro Pereira and Pedro Guimaraes, in a move that could be an attempt to carve out a niche in investment banking. A Plural spokesman confirms the hires, but declines to comment on the role they will play upon joining the firm, which has about BRL600m ($360m) under management. This comes after Plural agreed to buy competitor Banco Modal for an estimated BRL130m, and it is now rumored to be in talks to acquire local brokerage Flow Corretora. Pereira and Guimaraes are reunited with Rodolfo Riechert and Andre Schwartz, who founded Plural in 2009 after they left BTG. Guimaraes, a FIG investment banking specialist, and Pereira, an ECM specialist, left BTG last year.
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HSBC Names Chile IB Head
HSBC has appointed Monica Duwe as head of global banking, Chile. The newly created role oversees products and services including M&A advisory, DCM, ECM, leverage and acquisition financing, and project and export finance. Duwe will be based in Santiago and report to Chile CEO Gustavo Costa and CEO of global banking for the Americas Gerardo Mato. She joins from BNP Chile, where she spent 7 years, most recently as Chile country manager.
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Inbursa to Issue up to MXP6bn
Mexico’S Banco Inbursa plans to issue an up to MXP6bn ($479m) in the local markets through a 5-year floater on September 28. The bonds are rated mxAAA on a national scale, with proceeds going towards general corporate purposes. Inbursa and Bank of America Merrill Lynch will manage the transaction. The subsidiary of the billionaire Carlos Slim-controlled financial group last visited the domestic market in July, when it priced MXP4.9bn 2014 bonds at TIIE+20bp with Actinver, BAML, Inbursa, and Santander.
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Banco Falabella Places COP Sale
Banco Falabella has raised COP150bn ($84m) in a local market bond sale. The Colombian credit unit of the Chilean retailer chose to issue COP70bn in 2013 bonds paying the IBR+2.13% and COP80bn in 2023 IPC-linked bonds paying 4.04%. Total demand topped COP194bn. BBVA, Corredores Asociados and Correval are managing the sale, rated AAA on a national scale. It is the latest in a series of issues from financial institutions. Leasing Bancolombia expected to follow next week, with a COP300bn-COP400bn sale.
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BCP Heard Preferring a Tier 2 Trade
Banco de Credito del Peru (BCP) wrapped up investor meetings in Boston and New York Wednesday, and is leaning towards issuing a Tier 2 dollar bond, says an investor who attended the meetings. With BCP’s Tier 2 capital ratio at 17%, the bank is looking to issue a 10-year dollar bond of $300m or more to boost its Tier 2 capital ratio to 25%, he adds. Timing for the potential 144A/RegS issue could be as soon as this week if market conditions permit. BAML and Morgan Stanley took the Baa2/BBB rated bank through fixed-income investor meetings in Europe, the US and Latin America. BCP was last in the in the international markets in March, raising $700m in 2016s priced at 98.815 with 4.75% coupon to yield 4.792% or UST + 275bp. BAML and JP Morgan managed that sale.