TGS Bags $500m at 7.875%

Argentina’s Transportadora de Gas del Sur priced Wednesday one of the country’s largest corporate bond offerings in recent memory, a $500m issue of 2017 non-call 5 bonds at 7.875%. The price was tightened from a 8% area. The book was heard at over $3.3bn, with 56% US, 27% European, 8% Asian and nearly 5% Argentine participation. The bulk of the buyers were large institutions and hedge funds, according to a banker close to the deal. The issuance was effectively a liability management exercise, in which TGS took out most of its 2010s and 2013s issued in 2005 which carry 8.0% and 8.5% coupons. Those notes include restrictive covenants, including a cash sweep, which increases the annual cost of the debt to over 10%. The remaining 11% of the 2005 issues is expected to be taken out in June with cash. Merrill Lynch and JPMorgan had joint books. It is rated B1/B+ (Moody’s/S&P) and the funds raised are being used to buy back debt. In a statement Wednesday, TGS said that it has had a take-up of 89.4% for its offer to buy back $424m of its 2010 and 2013s, originally issued in connection with the company’s debt restructuring in 2004. TGS also plans to cancel a debt of $206m with the IDB.