Category: Chile

Chile’s Inversiones Alsacia has raised $464m from a new 2018 bond, after having widened pricing to 8.0%. Investors were drawn to the deal due to the scarcity of Chilean high-yield bonds, but say they needed to become comfortable with the highly-leveraged concessionaire’s use of proceeds for an acquisition. The book reached more than $700m, according to bankers on the deal. The BB/Ba2 bond priced at par with an 8.00% coupon. Alsacia had communicated the 8.00% yield Friday, after slow bookbuilding at the original 7.50%-7.75% guidance, a move that caused Fitch to lower its expected rating one notch to BB from BB+. The bond was not seen trading frequently Monday afternoon, according to traders, who saw it at par or just above. “The downside is aggressive [7x] leverage, but that could be offset by a revenue stream that is very defensive,” says a participating New York EM investor. He notes that if cash flows perform as expected, leverage could get down to 3x in 3-4 years. RBS says in a report that it likes the bond’s credit protection and enhancements, willingness of the government to subsidize the transit program, and the sophistication of the Santiago mass transit system. However, the bank also notes as drawbacks a lack of history of regulatory framework, a need for the government to subsidize the program, and lack of a contractual mechanism to compensate for shortfalls in revenue. There are no direct comps, RBS says, but the Alsacia bond is attractive compared to the closest the bank can find. These include AES Chivor (Ba2/BB, trading at 4.76%), Pampa Calichera (BB minus, 6.36%) and Colbun (BBB/BBB minus, 5.68%).Proceeds from the amortizing bond with a 5-year average life are destined to retire existing debt, and to purchase a 53% stake in fellow Transantiago System concessionaire Express de Santiago Uno, and retire debt there. The bonds will be secured by a first lien interest of total revenues and contract rights, as well as all assets owned by Alsacia and Express,

Inversiones Alsacia is expected to price a new 2018 bond as soon as today, according to bankers on the trade. The Chilean bus operator has set guidance of 7.50%-7.75% for the $464m deal. The issuer is aiming to price today, investors following the deal say, but could come as late as Monday if the book – heard Thursday afternoon at $400m – builds less quickly than expected. The BB+/Ba2 deal appears to be generating interest, as high-yield Chilean corporates are a rarity, though the structure takes some time to get used to, investors note. “The company is 7x levered, but the free cash flow to debt service coverage is good,” notes a New York EM investor. The proceeds are destined to retire existing debt, and also to purchase the remaining 53% stake in fellow Transantiago System concessionaire Express de Santiago Uno, and retire debt there. The bonds are secured by a first lien interest of total revenues and contract rights, as well as all assets owned by Alsacia and Express, excluding a bus terminal located in Huachuraba, Chile. The issuer finished meeting investors in North America, LatAm and London on Thursday. BAML and JPMorgan are managing the sale.

Chilean water utility Aguas Andinas is planning to issue up to UF4.40m ($197m) in local bonds, according to a prospectus. No timing for the issuance is indicated. The AA+ rated bonds will have 10-year and 30-year tranches. Proceeds will go to pay down debt and to finance investments. BBVA and Larrain Vial will handle the sale. Aguas Andinas’ last issue was in April 2010, when it placed UF2.75m in local bonds. It sold UF1.00m in a 6.5-year tranche priced at 100.0 with a 2.90% coupon to yield 2.90%, a spread of 68bp over the central bank’s BCU5 bonds. A 21.0-year UF1.75m tranche priced at 101.61 with a 4.20% coupon to yield 4.08%, a spread of 43bp over the BCU5. BBVA and Larrain Vial also handled that sale.

Chile’s Inversiones Alsacia is heard whispering a yield of around 7.5% for a new bond, according to investors. The Santiago bus concession operator is planning a $464m 2018 bond, according to Moody’s, and is scheduled to meet investors through Thursday. The pricing would be fair, given that it is in Chile and has guaranteed revenues, a New York investor looking at the deal says. Proceeds are destined to retire existing debt, and to purchase the remaining 53% stake in fellow Transantiago System concessionaire Express de Santiago Uno, and retire debt there. The bonds will be secured by a first lien interest of total revenues and contract rights, as well as all assets owned by Alsacia and Express, excluding a bus terminal located in Huachuraba, Chile. BAML and JPMorgan are managing the sale, rated BB+/Ba2.

Fitch has upgraded Chile’s ratings to A+ from A. The outlook is stable. The upgrade reflects years of prudent macroeconomic management that incorporates healthy public finances, according to Fitch. It also highlights an effective and credible monetary regime, competitive markets and multiple free trade agreements.. Fitch estimates 2010 GDP expanded by 5.3%, a better-than expected result given the intensity of the February 2010 earthquake. It also expects growth to accelerate to around 6.0% in 2011 owing to Chile’s robust domestic fundamentals and institutional stability, before returning to a more trend-like 4.8% thereafter.