Interbank Seen Tighter by Waiting

A recent tightening in Peru CDS will benefit borrowers pricing off the hedging benchmark. One example that stands out is Interbank, which for several weeks has been in the process of putting together a $150m placement of DPR bonds via Deutsche Bank. The BBB deal, heard consisting of a $120m 6-year and $30m 10-year, was expected to price in late March, but is still being worked on, say people close to the process. It should price this month, and pricing is understood to be 150bp over Peru 5-year CDS, though people close to the deal decline to comment on terms. In early March, that would have resulted in an all-in cost of around 500bp-600bp over Libor. But CDS has tightened some 95bp in the past month, according to UBS. At Friday’s levels of around 290bp for the 5-year CDS, Interbank’s all in cost could land in the mid to low 400s, assuming it has stuck with the original structure. In late March, Bradesco placed a $100m DPR via WestLB. Pricing came in the mid to low 200bps area over Libor, say people familiar with the terms. Bankers are eyeing new markets for DPRs, including Chile and Mexico. MT100s are done either on a biltateral basis with an underwriter, or placed with a select group of institutional investors, such as insurance companies and multilaterals.