Chilean utility AES Gener priced a new 2021 Thursday as part of a debt exchange and tender for its outstanding 2014s. In all its sold $400m of the 10-year notes at 99.037 with a 5.25% coupon to yield 5.375% or 242bp over UST, coming at the tight end of 5.375%-5.50% guidance. Close to $300m of that took the form of new money, while the remainder is to be used in the exchange. As of July 27, the company had received tenders to purchase $151.07m of 7.50% 2014s or 37.77% of the outstanding senior notes, while also receiving offers to exchange $100.20m of the notes for the new 2021. At the same in a separate local transaction, the company received tenders to purchase $93.8m of Chilean 8% notes due 2019 or about 48% of the outstanding bonds. Investors who opted for new bonds will receive $1,000 in 2021s plus $150 in cash per $1,000 principal of existing bonds if they had tendered prior to July 27. Thereafter, they will receive new bonds plus $110 in cash as long as they tender before the final deadline of August 10. Holders choosing cash got $1,130 per $1,000, and only had until July 27. Citi and Deutsche Bank are acting as dealer managers.
Category: Bonds
Brazil’s Derivative IOF Could Encourage Global BRL
Neither bankers nor investors see the Brazilian government’s new IOF tax on derivatives diminishing the attractiveness of overseas issuance by the country’s companies. Indeed, the move may be another reason for accounts to migrate to the global BRL market as they look to avoid the increasingly onerous tax burdens being imposed onshore. “If the gap we’re seeing between offshore and onshore levels remains, it could make global BRL issuance more attractive [to investors],” says a New York based DCM banker. The new tax will likely make it cheaper for international buyers to hedge currency risk offshore, he adds. “This should drive more investors into global BRL,” adds another banker, noting a secondary rally in outstanding global-BRL bonds. “It will not change investing behavior fundamentally, but it will make things a bit more expensive for us,” says a North American EM debt portfolio manager. He explains that even if he hedges offshore, he expects it may still involve a counterparty using onshore hedging, and the cost is likely to be passed on. So far the impact of the new tax, which is part of the government’s effort to contain the strength of the BRL, has had a greater impact in the FX markets, where liquidity has already fallen and is expected to shrink further with Goldman Sachs downgrading the stock of BM&FBovespa on the expectations there will be fewer transactions. This could deter fast money, but the larger question for buy-and-hold types is the overall direction of government policy. “If investors see more and more controls coming, you will see a lot of interest move away from Brazil,” an EM bond investor says.
Cemig Wraps Up Non-Deal Roadshow
Brazilian utility Cemig is wrapping up non-deal roadshows this week with Deutsche Bank after visiting international accounts. The borrower isn’t expected to tap anytime soon given it has no immediate funding needs, but it could try its luck later this year or perhaps in early 2012, says one banker. The utility is seen as a prime candidate for an inflation-linked BRL global issue much like Banco Votorantim did earlier this year. With revenues in reais and linked to inflation, utilities like Cemig are being targeted by banks pitching this idea. This comes amid much talk about more nominal global BRL deals on the horizon, with Banco Safra heard late Thursday announcing roadshows for such a trade through itself, JPMorgan and UBS.
Chilean Investor Sells $120m Local Bond
Chile’s Sociedad de Inversiones y Servicios de la Construccion has raised UF2.5m ($119m) from the sale of two local bonds. The investment vehicle of construction trade association Camara Chilena de la Construccion chose to place two of three possible tranches in a deal that saw 2.3x demand. A CLP21.8bn ($48m) 2016 peso-denominated tranche priced at 100.01 with a 6.80% coupon to yield 6.79%. A UF1.5m UF-denominated 2032 tranche with a 10-year grace period priced at 96.96 with a 3.6% coupon to yield 3.86%. Both tranches came at the same spread of 74bp to government bonds, according to a banker on the sale. A 5-year UF tranche included in the original registration was not used. Celfin and IM Trust managed the sale, rated AA/AA+ on a national scale. Inversiones la Construccion holds stakes in the AFP Habitat pension fund, insurance companies Camara and Isapre Consalud, while also having holdings in clinic operator Red Salud and other companies.
Colombia Expected to Hike Rate Today
Colombia’s central bank is expected to hike its rate by 25bp to 4.50% today, although Goldman Sachs says there is a moderate probability of a pause in the normalization cycle. The monetary policy committee was divided on its decision to hike the rate a month ago. Goldman cites currency appreciation and tolerable inflation dynamics as reasons behind a potential pause. Deutsche Bank says it expects the bank to keep the rate at 4.25%.
Elektra Crosses Finish Line
Mexican retailer Elektra put to bed its first international bond in over 10 years after printing a new $400m 7-year NC4 Thursday at 98.656 with a 7.25% coupon to yield 7.50%, in line with guidance and earlier investor expectations of a 7%-8% finish. Some accounts certainly wavered over a credit controlled by controversial Mexican magnate Ricardo Salinas, and the book size was heard to be modest, with some accounts hearing $500m plus on Thursday morning, but demand was sufficient to upsize the trade from an initial target of $350m and stick to 7.50% area guidance. Indeed, some 185 accounts were thought to have participated. “That’s not a bad tally – but I would wager a larger portion of fast money involved than you’d usually expect,” says a trader. .On the break, the bond slipped a touch to 98.50 bid, but like recently issued bonds from sister company TV Azteca, Elektra was expected to eventually perform relatively well after a less than perfect start. Interest payments fall on February 6 and August 6, starting next year. The bond carries a make-whole call of T+50 prior to August 6 2015 and is callable thereafter on August 6 at 103.625 in 2015, at 101.8125 in 2016 and at par in 2017 and thereafter. There is also an equity clawback for up to 35% of the bond at 107.25 before August 6 2015. Joint bookrunners were BCP Securities, Jefferies and UBS.
Haiti Receives IDB Grant
Haiti will receive two grants from the IDB totaling $90m to help finance construction of an industrial park in its northern region and to support efforts to modernize its energy sector. Since the 2010 earthquake, the IDB has approved more than $340m in grants and disbursed $255m. About 70% of Haiti’s population has no access to electricity. Available generation capacity stands at less than one-third of the estimated 500 megawatt demand.
Minerva Shrinks, Discounts to Finish Convert Deal
Minerva’s convertible debentures priced below the range, to raise BRL190m ($121.17m), less than the BRL300m it had targeted. In what was thought to be the Brazilian market’s first-ever public sale of mandatorily convertible debentures, the meatpacker shrunk the number of 2015 notes to 200,000 from 300,000, and priced below the 97-103 range at 95. The interest rate – 100% of DI – and conversion price range – BRL6.00-BRL8.00 – were established prior to bookbuilding. Shares closed at BRL5.39 Thursday. The deal was fortunate to get done, after leads extended the bookbuilding period by one day as demand sagged in markets around the globe. Most issuers of late, including Brazilian Copersucar, and Uruguay’s Union Agriculture Group, have had to cancel equity deals, and nobody else in the region has launched. ECM bankers expect a lull in the new issuance market, until there is more clarity on the US debt situation, the euro-zone debt problems and more stability is seen in Brazil’s domestic market. Though the equity pipeline has been healthy all year, the bankers report shrinking backlogs of yet-to-be-announced transactions. Minerva plans to use the proceeds to repay existing debt, and for working capital. Minerva is rated BBB minus on a national scale. Goldman Sachs, Deutsche Bank and Banco do Brasil were leads.
Camargo Subs Close Tender
Holders of 70.9% of Caue Finance’s 2015 bonds and 55.2% of Loma Negra’s 2013 notes have accepted tender offers that expired Monday. Each also received holder approval to eliminate restrictive covenants.” Holders of $106.3m in Caue’s 8.875% 2015 bonds and $55.2m of Loma Negra’s 7.25% of 2013 bonds had accepted the offers as of the July 26 expiration. For each $1,000 in principal holders of the 2015s and 2013s got $1,750 and $1,070, which include a tender premium of $165m and $60 respectively. After the early bird, holders were offered a lower $1,165 and $1,060. The companies are indirect subsidiaries of Brazilian conglomerate Camargo Correa. BAML was sole dealer manager.
Minerva Convert Uncertain Amid Market Pain
The fate of a convertible debenture sale from Brazil’s Minerva was unclear Wednesday evening, after the issuer extended the bookbuilding period by one day and sought to set a price Wednesday night, targeting BRL300m. The results were expected by this morning for what has been touted as the Brazilian market’s first-ever public sale of mandatorily convertible debentures, which was heard struggling to fill order books as risk markets continued to sour. “In this market nothing is getting done. There is zero international money going into Latin America,” says an ECM banker away from the deal. The volatility is due not only to concerns about debt problems in the US and the euro-zone, but also to increased worries about the domestic picture in Brazil, he adds. Equity transactions from Copersucar and Union Agriculture Group have been pulled in the last week, and Abril Educacao priced below its range. Minerva is looking at a reoffer price of between 97.00-103.00 of face value, with the interest rate and conversion price range established prior to bookbuilding. The bonds are to pay interest at 100% of DI, with the minimum and maximum conversion prices set at BRL6.00 and BRL8.00, respectively. Proceeds are marked for the repayment of existing debt, and for working capital. Minerva is rated BBB minus on a national scale. Goldman Sachs, Deutsche Bank and Banco do Brasil are leading. Officials at the company and the lead managers did not comment or did not return requests for comment Wednesday.