Category: Bonds

Hogan Lovells says it has enhanced its DCM and structured finance capabilities with the addition of Emil Arca as a partner based in New York. Arca – a veteran of the LatAm structured finance market – was formerly partner at Dewey & LeBoeuf, where he worked for 16 years. He has worked on several marquee LatAm structured deals, including the 1995 Aracruz future flow transaction, the 2001 Nikkei Remittance Trust, Banco do Brasil’s 2001 DPR and Metrofinanciera’s 2007 ADN issue. Arca’s new firm is understood to have an EM focus, and Arca is expected to remain active in Latin America. “We are seeing definite signs of improvement in the securitization market and this is exactly the right time for the team to be growing its capability in this area,” say Hogan Lovells’ finance co-heads Ben Hammond and David Hudd.

A July 13 Daily Brief entitled “Bermuda Set for DCM Visit” incorrectly states guidance on a new 10-year bond from Bermuda. It was 262.5bp area over Treasuries.

Pemex has pumped the dollar DCM for the second time this year, offering a generous concession to participants in a new $2bn 2021 bond. The BBB/Baa1 bond priced at 99.011 with a 5.500% coupon, to yield 5.626%, or UST plus 250bp, the tight end of 250bp-260bp guidance. “The bond came at an attractive level,” says a participating London-based EM investor. The buyer spotted fair value at 220bp-225bp, based on the existing 2020 bonds trading to yield 5.15%-5.20% prior to announcement. The transaction drew more than $5bn in demand, say bankers on it. They estimate fair value at about 230bp, implying a 20bp premium for new issue. The bond had not broken for trading at Tuesday’s close, but was heard as high as 0.5 points up in the gray. Some 250 accounts participated, according to a banker on the sale, who estimates about 70% participation from US accounts, roughly 20% Europe, and close to 10% LatAm. There was reverse inquiry for a $200m-$300m retap of existing 2038s, according to investors. However, a banker on the trade says while some accounts wanted the long end of the curve, the issuer decided to focus only on the 2021. Deutsche Bank, Goldman Sachs and HSBC managed the sale. An issue had been expected ever since a roadshow in June. Pemex has been actively milking bond markets this year. It has raised MXP30bn so far through 2 domestic deals and a January $1bn sale of 6.00% of 2020s at a 6.162% yield, through Barclays, Citi, and Credit Suisse. Tuesday’s sale was Pemex’s largest since it got $2bn from a 2019 in January 2009 priced to yield 8.25%. A banker on the deal notes that Pemex was aiming to have Tuesday’s transaction complete its USD borrowing for 2010. Government officials say GBP may be an attractive market for the quasi sovereign.

Several LatAm corporates are adding to an increasingly crowded cross-border DCM pipeline, as a window of opportunity appears to have opened on the back of successful taps from issuers like Colombia and BM&FBovespa. Brazilian airline Gol is set to price as soon as today a new 2020 bond, which is expected to be $200m-$400m in size, according to Fitch, which assigns a BB minus rating. Proceeds from the sale, led by Bank of America Merrill Lynch, Citi, and Itau, will be used to refinance existing debt. Mexican retailer Grupo Famsa is meanwhile preparing a deal of up to $200m due in up to 5 years, according to Fitch, which assigns a B+ rating. The Mexican retailer is expected to price by the end of this week, according to bankers managing the sale. The retailer is seeking funds to refinance debt as well as for general corporate purposes, and has hired Credit Suisse to lead. Elsewhere, Argentina’s Inversiones y Representaciones (IRSA) is reviving its plan for a 10-year bond, according to investors. IRSA had been shopping in May the 2020 at a size of $150m-$250m. Citi is global coordinator on the transaction, rated B internationally and AA minus locally, with Itau and Santander as bookrunners. And Brazil’s JBS is heard packing its bags for a non-deal roadshow, through JPMorgan and Santander, as is Telefonica de Chile, also via JPMorgan. The newcomers and revivals join an already active pipeline. As previously reported, Brazil’s CSN is heard preparing to launch a transaction, if market conditions allow. Banco do Brasil, HSBC, Itau, Morgan Stanley and Santander managed the meetings for the Ba1/BB+/BBB minus steelmaker, which last issued in September, for $750m. Banorte, and Magnesita also completed roadshows in the last few weeks. Bancolombia set to present this week, while Chubut and Banco Votorantim are contenders.

BM&FBovespa marked its international DCM debut with the first investment-grade Brazilian bond since the cross-border markets shut down in late April. The exchange’s $612m in 2020 bonds took advantage of bullish expectations about growth in Brazilian markets to draw about $4.5bn in total demand for the issue. “It’s a good credit and a good story. It’s a play on continued Brazilian growth,” says a participating Brazil-focused investor at a New York asset manager. Size was capped at $612m to match the amount needed to fund a recent acquisition and traded up about 1.5 points by Friday’s close, according to traders. The BBB+/Baa2 2020 landed at 99.635 with a 5.500% coupon to yield 5.548%, or UST plus 250bp. This was the tight end of 262.5bp-area guidance, and in from 275bp-area initial talk. The issue offered a pickup to the Baa2 BNDES 2020, which traded around UST plus 235bp-240bp Friday morning, according to investors. A less liquid 2020 bond from Nasdaq (Baa3/BBB) was also trading in the 235bp-240bp area, investors say, offering another comp. Buyers notes optimism about continued expansion and consolidation in Brazil markets, as well as the issuer’s low debt levels, as reasons to buy. Some 250 accounts participated, according to bankers managing the sale, with US-based investors getting about 50%, Europe 35%, and 5%-10% going to LatAm. Proceeds will be used to fund the acquisition of a stake in US-based CME Group. BM&F agreed in February to raise its ownership in CME to 5.0% from 1.8%. Bank of America Merrill Lynch, Bradesco, HSBC and JPMorgan managed the bond issue.

Scotia Chile is heard planning to issue up to UF2m ($79m) in 2 tranches, one due in 5 years and the other in 10, according to a DCM banker away from the potential issue. Proceeds will likely be used to finance lending, he adds. April 16, the bank issued UF1.5m in 2035 local bonds at 107.10 with a 4.50% coupon to yield 4.08%, a spread of 48bp over the UF-20 benchmark, according to Scotia Sud Americano Corredores de Bolsa, which managed the sale. Demand was UF5.2m, it adds. The notes are rated AA+ by Fitch and AA minus by Feller.

Chile-based Forum Servicios Financieros is planning to issue up to UF2m ($79m) in 2.5-year local bonds, say DCM bankers away from the deal. Proceeds will be used to enhance liquidity. BBVA, which owns about 50% of Forum, will lead the sale. Forum specializes in financing car loans.