Talk of an imminent Venezuela bond continued to swirl Wednesday, with RBS citing local rumors about an up to $4bn 12% 2031. The specific details associated with market chatter suggests that there may be some weight behind the rumors, though several shops including RBS say the sovereign is under no pressure to issue. If the sovereign were to issue a new 2031, RBS calculates that it will likely be priced at 101.00, but with a fair value yield to maturity and secondary level of 14.8% and 82.20, respectively. Such USD deals are typically sold at the official FX rate to locals who arbitrage against the weaker parallel rate by selling the bonds to foreigners at a steep discount. It is thought that the government will opt for a longer dated bond to smooth out debt maturities. Nomura, however, believes that the issuer may well be targeted at importers in need of dollar assets and could come in a single transaction. However, the shop has its doubts about an imminent issue partly because the Minister of Planning and Financing Jorge Giordani has expressed opposition to such issues. That said, Nomura expects more supply later in the year as the government seeks to replenish the Sitme, the state-run FX system.
Category: Bonds
Banks Prepare For Guatemala RFP
Bankers are heading to Guatemala to pitch public credit on expectations that the sovereign will soon issue RFPs to refinance its maturing $325m 10.25% bond due November 2011. “It is not clear whether it will be a local or international [bond],” said one banker. “We expect that they would take advantage of low rates [in the international markets] and be interested in maintaining an international investor base by going external.”
BarCap, Citi, BTG Clinch City of BA Mandate
Barclays, Citi and Brazilian shop BTG have won the mandate to bring the City of Buenos Aires to the international bond markets for up to $500m, market sources say. Bankers had been waiting for a decision ever since the borrower sent out RFPs to about 13 institutions earlier this year. The City was last in the market in April 2010 through Credit Suisse which priced a $475m 5-year at par to yield 12.5%. This comes after the Province of Buenos Aires retapped its 11.75% 2015s for another $250m just last week, pricing it at 102.854 to yield 10.875%.
Bco Industrial Puts Tier II to Bed
Guatemala’s Banco Industrial priced Wednesday a US$150m 10-year subordinated Tier 2 bond (Ba2/BB) at par to yield 8.25%, coming flat to earlier 8.25% area guidance and at the tight end of low-to-mid 8 whispers. Considered Guatemala’s largest bank, the sub investment grade credit had originally been seeking between $150m-$250m, but capped the deal at the lower end of that range as only $150m could qualify as Tier 2 capital. The bond jumped on the break to trade at 100.75-101.25. While difficult to comp to investment-grade Tier 2 bank issuers that have recently come to market, investors looked at the sovereign, with the deal coming at a quarter point concession to government paper, according to one participating investor. The 144/Reg S notes are secured by a subordinated loan from Bank of America to Banco Industrial, Fitch says. The US bank is transferring its rights to the loan to a trust, which in turn pledges the loan as collateral. Uses of proceeds are slated to repay subordinated debt and to strengthen regulatory capital. The notes are governed by New York law. Banco Industrial was brought to market by sole lead BAML. The issuer last came to market in 2008 when it priced a $30m 60-year NC10 priced at par to yield 9% through Credit Suisse.
Camargo Correa Pair Reaches Majority in Tenders
Caue Finance and Loma Negra have reached 69.6% and 54.6% respective acceptance in tender offers for outstanding USD bonds. Holders of $104.5m in Caue’s 8.875% 2015 bonds and $54.6m of Loma Negra’s 7.25% of 2013 bonds had been accepted as of the July 19 early acceptance date. The companies are indirect subsidiaries of Brazilian conglomerate Camargo Correa. 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. Early bird premiums on both come to $10. That will drop to $1,165 and $1,060 for the remainder of the offer period, expiring July 26. Caue Finance, an SPV, has also received sufficient consents to eliminate restrictive covenants, while holders of Loma Negra, a cement maker, will hold a meeting on July 26 to seek approval on amendments. BAML is acting as sole dealer manager.
CAP to Spend $150m in 2036 Buyback
Holders of Chilean steelmaker CAP’s 2036 bonds have agreed to sell back $130m (65%) of the bonds in a tender offer, meaning it will spend $149m on the repurchase. CAP offered holders of the $200m in outstanding 7.375% 2036 bonds $1,117.33 per $1,000 principal in the offer expiring Tuesday. Citi was 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.
Elektra to Meet International Accounts
Mexican retailer Grupo Elektra is approaching international investors for the first time in over 10 years as it prepares investor meetings this week via BCP Securities with the intention of pricing a RegS 7-year NC4. The borrower will be in Switzerland and Miami on Friday and then next week it will be in New York, London, Singapore and Hong Kong between July 25 and 26. The company is part of Ricardo Salinas’s holdings, which include TV Azteca, Banco Azteca and Iusacell. Salinas has courted his fair share of controversy in recent years after being investigated by the SEC and de-listing Grupo Azteca in the US. The name therefore often raises red flags among investors. For instance, Salinas’s involvement in Mexican fertilizer Fertinal unnerved some accounts looking at its bond, which was eventually pulled. On the other hand, TV Azteca managed to sell a $300m RegS only 2018 bond earlier this year, upsizing it from $250m and pricing it at 98.669 with a 7.50% coupon to yield 7.75%. Like Grupo Elektra, TV Azteca’s issue marked the company’s first international deal in over a decade. Elektra itself last sold bonds abroad in 2000 when it issued a $275m 8-year NC4 at par to yield 12%. More recently, Elektra priced a MXN2bn local 3-year at TIIE+300bp in March.
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.
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
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.