Category: Chile

Chile’s Arauco concluded a two-day roadshow Tuesday, with a 2019 bond set to follow as soon as today. Investors expect a $300m-$600m issue that could yield in the mid 7% area. JPMorgan is managing the Baa3 rated sale, which provides a test for non-government supported investment-grade credit, following a recent stream of quasi-sovereigns and sovereigns. Elsewhere, Brazil’s Eletrobras is set to conclude its roadshow today, and follow it this week with a 2019 bond of $600m-$1bn in size via Credit Suisse, seen coming in the low 7% handle yield.

Chile’s Transelec is looking to swap dollar debt for peso debt, and has launched a tender offer to buy up to $220m of its outstanding 7.825% of 2011 bonds. The transmitter is offering to pay principal plus accrued interest at 200bp over the yield on the 2011 US Treasury bond. Holders tendering by July 28 will receive an additional $30 per $1,000. The tender offer expires August 14, contingent on a $100m minimum acceptance and Transelec’s successful raising of debt domestically. HSBC is dealer manager. Transelec originally sold $400m of the 2011s in 2001 through ABN AMRO and Salomon Smith Barney. Its most recent domestic bond was a $22m equivalent 4.5% 2027 inflation-linked note sold in April 2008 through Bancoestado.

S&P has placed Chile-based CAP’s BBB minus ratings on credit watch negative as it expects significant deterioration in its financial risk profile because of lower cashflow generation as sales drop amid the global economic slowdown. “We expect that weaker cashflow generation and financial ratios could potentially reduce the company’s high cash position of $381m as of March 31,” S&P says. It adds that this would result if the ferrous metal company is not able to internally finance capex and dividends, and if it breaches certain financial covenants included in the terms and conditions of a $150m outstanding bank loan, which could potentially trigger early repayment.

Chile does not plan to issue a dollar bond this year, finance minister Andres Velasco says. “Chile has been authorized to issue a little more than $2.7bn in debt. It has already announced plans to issue this amount domestically,” Velasco tells reporters Thursday on a New York visit. Chile’s government announced plans this month t to sell $1.7bn equivalent in 5 and 10-year peso and UF-dominated domestic bonds, in addition to the $1bn it announced in January. Velasco says the Chilean economy likely will show negative year-on-year growth during the next few months, before seeing some recovery later this year. He declines to state whether he believes the Chilean economy already has already bottomed out.

Chile’s Celulosa Arauco y Constitucion has added its name to the list of LatAm issuers looking to jump on investor demand before the summer hiatus. The producer of pulp and wood products is preparing to sell a “benchmark size” 2019 dollar bond. The BBB/Baa2 issuer begins investor meetings today on the US West Coast, followed by visits to Boston Monday and New York Tuesday, with a sale to follow, depending on market conditions. JPMorgan is managing the process, with BBVA and Santander as passive bookrunners. The issuer this week was downgraded to BBB from BBB+ by S&P and had its outlook lowered to negative from stable by Moody’s, amid concerns about short-term leverage. It sold $146m equivalent in 2014 and 2030 bonds on the domestic market in March, and last visited the dollar market in 2005 with a $400m 5.625% 2015, also via JPM. The mandate represents the latest in a string for JPMorgan, following Ecopetrol and EPM. JPMorgan and Credit Suisse are rumored to be running a bond deal for Trinidad’s Petrotrin, and JPMorgan is likely to score a mandate for a dollar issue later this year from Brazil’s Cemig, after conducting the borrower’s non-deal road show this Spring.

Moody’s has changed Arauco’s outlook to negative from stable, saying the Chilean company faces operating and credit protection challenges that could undermine its Baa2 rating. The agency says Arauco’s margins in 2009 have declined due to a deterioration in the global economy and sharp declines in volume and price across all business segments. Moody’s believes margin pressure will continue over the intermediate term despite recent benefits achieved from lower input costs. The previous day, S&P cut Arauco’s rating to BBB from BBB+ on weaker-than-expected projected financial performance that it says will likely prevent the company reducing short-term leverage. As of March 31, Arauco had about $2.7bn in financial debt. The total debt-to-Ebitda ratio is less than 3x.

Antofagasta subsidiary Antofagasta Railway has acquired a 40% in GDF Suez’s Inversiones Hornitos, which owns the 150MW thermoelectric power plant being built in Chile. Antofagasta will cover 40% of the $400m needed to build the plant, the buyer says. The plant will provide energy to the buyer’s Esperanza copper-gold mine.

S&P has cut Chile-based Celulosa Arauco y Constitucion (Arauco) to BBB from BBB+ based on the firm’s weaker-than-expected projected financial performance that it says will likely prevent the company reducing short-term leverage. “Nevertheless, we expect Arauco to continue to benefit from a very strong competitive position; a manageable, well-structured debt maturity profile; still-adequate credit measures; and very good access to refinancing,” says S&P. As of March 31, Arauco had about $2.7bn in financial debt. The total debt-to-Ebitda ratio is less than 3x.

Chile’s Electro Metalurgica has sold $57m equivalent in inflation-linked bonds on the local market. The producer and supplier of steel and iron components for the mining industry priced UF1.5m ($57m) in 2032 bonds at 101.01 with a 4.60% coupon to yield 4.50%. The notes feature a 10-year grace period. Elecmetal plans to refinance debt with the proceeds. IM Trust managed the sale, rated AA on a national scale.

Chile’s government plans to sell 5 and 10-year domestic bonds monthly from mid-July through December, the Hacienda says. Last month, it announced it would issue $1.7bn equivalent in local bonds to finance a projected fiscal deficit. The auctions will offer a combined total of CLP170bn in 5-year peso-denominated bonds, UF13.5m in UF-denominated inflation-indexed 5-year bonds and UF25m in 10-year notes.