Copper Miner Paves Way for Corporates

Chilean state-owned copper producer Coldelco braved sour markets and US presidential inauguration distraction to become the first LatAm corporate out of the gates this year, bagging its first cross-border bond since 2006. The quasi-sovereign priced $600m in 2019 notes at 98.229 with a 7.500% coupon to yield 7.759%, or UST+537.5bp. This was the tight end of official 537.5bp-550.0bp guidance which followed early whispers of low 500s. Bankers and investors away from the deal say the yield indicates a new issue premium of 35-45bp, though that is difficult to gauge given that the closest outstanding bond is a relatively illiquid 4.75% of 2014. The concession is in line with recent sovereign offers. Bankers away from the sale note difficulties related to uncertainty about price levels following the recent Brazil 2019, as well as overly aggressive levels from the issuer. “They probably started off too tight,” says one, referring to early whispers. “It’s not a blowout, but it’s positive for the market,” says a dedicated EM investor, adding that the window for other issuers depends on how the bond trades in the next few days. The transaction grew from a targeted $500m, says a banker managing the sale, which garnered demand of $1.25bn. The A1/A notes were placed with 80-90 accounts, with about 75% from the US, 15% in Europe and 10% LatAm, Asia and other regions, says a banker on the deal. HSBC and JPMorgan were the leads. The sale – Coldelco’s first since a $500m 6.15% 2036 in 2006 – had been anticipated since JPMorgan and HSBC beat out a gaggle of pitches for the mandate in August. Codelco plans to spend $2bn on expansion this year, about half of which is set to come from the government, meaning it could seek some $400m extra in 2009 funds.