Venezuela is expected to issue an additional $5bn-$6bn in debt between Pdvsa and the Republic, according to a report by JPMorgan. “We would not expect a fundamental change in the overall policy framework that uses excessive USD issuance to locals to help prop up an overvalued FX rate until after the 2012 elections,” the bank says in the report. New bonds are expected to come wide by as much as 100bp. The 5.3 implied exchange rate requires the sovereign to issue relatively high-priced dollar bonds, though the finance ministry could potentially balk at the need for high coupons, according to the report. Pdvsa reopened $1.8bn of its 2013 bonds at the end of June, just weeks before paying the remaining $2.45bn maturity on its 2011s.
Category: Bonds
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Bco Industrial Whispers On 10-Year
Whispers on Guatemala’s Banco Industrial were being heard at low to mid 8s Tuesday on a $150m-$200m 10-year Tier 2 bond, with pricing expected as soon as today. The lender wrapped up roadshows last week with Bank of America Merrill Lynch. The notes are secured by a subordinated loan from Bank of America to Banco Industrial, according to Fitch which has assigned an expected BB- rating to the offering. The US bank is transferring its rights to the loan to a trust, which in turn pledges the loan as collateral. Considered Guatemala’s largest bank, Banco Industrial has a Baa3 local and Ba2 foreign currency rating from Moody’s. The company’s last foray into the debt capital markets was a $30m 60-year NC10 priced at par to yield 9% in 2008 through Credit Suisse.
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Braskem Prints 30-Year Bond
Brazil’s Braskem came with its long-expected 30-year bond Tuesday, marking the first LatAm issuer to venture this far up the curve since Pemex printed a long bond in May. It had been thought that the price-sensitive borrower had relinquished the idea of issuing into what has been a buyer’s market. But a rally in US Treasuries Tuesday opened a clear window and the petrochemical concern sallied forth. The capped $500m size no doubt helped generate some momentum as leads tightened initial talk of 7.375%-7.50% to 7.25%-7.30% before finally pricing the RegS/144A bond at 98.479 with 7.125% coupon to yield 7.25% or 308.1bp over UST. That was a touch wide to secondary levels on what was considered the closest, albeit slightly higher rated, comp Votorantim Cimentos (Baa3/BBBminus/BBB), which had 7.25% 2041s trading at around 7.16% or 297.6bp over. Leads were heard arguing that Braskem only paid for the credit spread to extend from 10 to 30-year, while others calculated it came with a 10bp new issue premium. “UST rallied 12-15bp during execution so it is hard to put a pin it,” says one rival banker referring to the new issue premium. In the end, final results were seen as tight but fair on what is now a Baa3/BBB minus/ BB+ credit. “The deal priced way too tight but it did well,” says a participating EM investor. Final book size reached $3bn with emerging market accounts (65%) and high-grade investors (35%) participating. Braskem’s 30-year follows placement of its 2021 $750m notes in April 2011 and $450m in perp bonds callable in 2015 issued in September. Investors say Braskem could have easily tapped its 2021s or created a new 10-year benchmark but it had long harbored hopes of issuing a 30-year. While rival bankers generally liked the trade, some questioned the logic of a 30-year when its perp was readily available. “Their perp is trading at 7.20% with a 7 3/8% coupon. For the same price they had the option to never repay the principal and restrike the coupon lower,” says th
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Buyside Hears More Noise around Global BRL
Ever since split-rated McDonald’s franchise Arcos Dorados generated a BRL3.6bn book on its successful BRL400m ($265m) 5-year global bond (Ba2/BBB minus), hopes of more such trades have run high. But talk of imminent BRL globals has grown even louder among the buyside in recent weeks, with names like lender Bradesco and steelmaker Usiminas being cited as possible candidates. This may all be speculation at this stage, as Bradesco, for one, is thought to still be in a blackout period, though earnings are due shortly. Bankers have certainly been hoping to replicate the success of Arcos Dorados as they pitch borrowers on the idea. And it is hardly surprising that Bradesco’s name comes up in conversation. After all, it was forced to abandon a global BRL bond late last year while watching rival Itau print its own BRL500m 5-year at 10.5%.“They will want to redeem themselves. It is more question of when as opposed to if,” says one banker. But Bradesco is not the only financial institution thought to be eyeing this product. “Banco do Brasil and BNDES , all these guys are looking at BRL,” says one banker. With both the euro and the USD under pressure, bankers think investors are more open to taking on local currency risk, especially in light of the comparatively higher yields. From the borrower’s perspective, pricing also remains attractive against where they can price over CDI, say some local bankers. Yet while the assets class continues to be one of the most popular destinations for foreign inflows, borrowers should be careful about rushing into what is still a shallow market. “You need to mark sure the coast is clear from competing supply and that the tone is right,” said one banker.
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CAP Sets Buyback Price
Chilean steelmaker Cap has set the repurchase price for the tender of its $200m of outstanding 7.375% 2036 bonds. It will offer holders $1,117.33 per $1,000 principal in the offer that was to expire at 5pm Tuesday, with settlement July 22. CAP has not yet give the results. Citi is acting as dealer manager. The 2036s were originally sold in 2006 through Citi and HSBC and priced at 99.761 to yield 7.395% or 250bp over. The BBB minus rated CAP recently extended a 3-year loan into a 5-year facility, upsizing to $200m from an original $150m.
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Cemex Seeks Ambitious Spread on Local ABS
Mexico’s Cemex is heard seeking ambitious spread levels on an up to MXP2.8bn ($213m) local asset-backed bond as it looks to refinance outstanding debt at a lower rate. Yet whether the cement company will achieve its pricing goals is still a matter for debate. Some investors are already heard drawing a starting line at TIIE+200bp if the borrower wants their participation in what is expected to be a 4 or 5-year bond backed by account receivables held by a trust. However, Cemex is heard sounding out accounts with a much tighter and audacious plus 80bp spread. Pricing is scheduled for August 4 and the bond will carry a similar structure to Cemex’s MXP2.2bn of asset-backed bonds due December 2011, which were priced at TIIE+250bp in 2009. Those bonds were also backed by a trust that held account receivables originated by Cemex Mexico and Cemex Concretos. “The company is exercising a call option in which it wants to refinance at a lower rate in an uncertain market,” says an investor who may opt out of this transaction but participated in 2009. “They want to rollover debt at a low rate at the expense of higher costs to investors.” The new bonds are expected to carry a local mxAAA rating. Proceeds are partly going to refinance the existing 2011s and for working capital. The Mexican cement company was last in the dollar market earlier this month with a $650m retap of its existing 9% 2018s through Citi, essentially helping it cover its financing needs for this year and next. IXE is the sole lead on the local transaction.
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Conditions, Pricing Leave YPF Shelving Bond
Investors and YPF failed to reach a compromise on pricing Monday against an already uncertain backdrop, forcing the Argentine oil concern to abandon attempts to sell its new 8-year, 7-year average life bond, say buyside sources. It is thought the market’s idea of a new issue premium and disagreements over pricing against comp Argentine oil comp Pan American Energy were just too much to bear for a company that had its heart set on a marquee trade. Indeed, with no immediate financing needs, YPF can afford to wait for better conditions. “YPF wanted to price way inside Pan American and investors wanted similar levels to PAE,” says an investor. By last week, however, leads were heard arguing that a new YPF or PAE 7-year would trade in the secondary market at around 6.15%-6.25% and with a 50bp new issue premium, a primary offering could come at around mid to high 6s. However, with investors heard asking for high 6s to a 7% handle, leads had little room to maneuver on pricing should markets suddenly turn south on further volatility emanating from the US and Europe. “It was a wide enough margin where we knew there wasn’t going to be any progress,” adds an analyst following the company. Broader market unease over debt problems in the US and Europe certainly made life difficult for the Argentine borrower, which was in no rush to pay a volatility premium. In this environment, some investors were simply unwilling participate in what was a relatively small corporate transaction, despite the company’s blue chip status in Argentina. “It doesn’t make sense to invest in a corporate that would be considered less liquid than the sovereign,” adds a second investor. The sovereign’s New York law 2017s have been trading to yield 8.072%. The oil and gas concern was looking to raise $300m-$600m size via bookrunners BNP Paribas, Citi, Credit Suisse, ING, Itau, Santander and Standard Bank. YPF is rated Ba2/BB minus from Moody’s and Fitch.
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AES Gener Launches Tender, New 2021
Chile’s AES Gener has launched a tender offer for its $400m in outstanding 7.5% 2014 USD bonds with the intention of also launching a new 2021. The electricity provider is offering 5.25% 2021s or cash to holders of the 2014s. Investors who opt for new bonds will receive $1,000 in 2021s plus $150 in cash per $1,000 principal of existing bonds if 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 will get $1,130 per $1,000, and have only until July 27. Gener also plans to sell new 2021s to the market, and is separately tendering for its local 8.0% 2019 bonds in a domestic offer. Fitch has put an up to $475m size on the new issue after rating it BBB minus last week. The offer is contingent upon a minimum $200m overall acceptance to the USD tender, as well as Gener successfully issuing enough new 2021s to the market to cover costs associated with the cash portion of the USD bond tender and the local bond ender. Citi and Deutsche Bank are acting as dealer managers.
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Ampla Closes Debentures
Brazil’s Ampla Energia has completed a BRL300m ($188m) floating-rate and inflation-linked debenture sale. A BRL117m 2016 tranche was priced at the DI plus 1.2%, under the 1.4% ceiling. It amortizes in each of the final 2 years. A 2018 IPCA-linked piece pays a fixed rate of 7.9%, and amortizes in each of the final 3 years. Ampla, a Rio de Janeiro-based distributor, which is a subsidiary of Spain’s Endesa, plans to use the proceeds to refinance debt. Itau and Santander managed the rule 476 transaction, rated AA minus on a national scale.
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Brazilian Metalworker Raises Debt
Brasmetal Waelzholz has completed the sale of BRL130m ($81m) of bonds in Brazil’s local market. The metalworker’s 2019 notes came at DI plus 3.0%, and amortize beginning in 2012. BW, as it is known, plans to use proceeds for capex and improving the capital structure of the business, according to a source at the company. Itau managed the rule 476 sale. BW was formed in 1973 from a joint venture of Grupo Souto Vidigal and Germany’s C.D. Walzholz. It supplies parts to the auto parts, appliances, hardware and several other industries.