Cheap Chile Funds Lure Foreign Issuers

DCM bankers are pitching various foreign borrowers the idea of bond issuance in Chile’s domestic market, following American Movil’s blowout April deal. Peru’s BCP has filed for a program in Chile, according to officials at the bank, and it could become the second issuer in that format. Hugo Horta, head of DCM at Chilean boutique IM Trust tells LatinFinance that his shop and competitors are pitching several potential issuers in Mexico, Peru, Colombia and Brazil. New York-based bankers at other shops confirm they are actively marketing the structure. The funding is attractive in dollar terms and Chilean institutional investors are hungry for diversification, says Horta, who declines to name companies he is pitching. America Movil offers most of the important characteristics that other issuers would need – high quality credit in a defensive industry well understood in Chile, in which the borrower also has sizeable domestic operations – local DCM bankers say. “There is not a company in Chile as large and as successful as America Movil is in its sector – this is an advantage,” says Horta. America Movil priced April 18 UF4m ($145m) in 5-year AA+ rated bonds on Chile’s domestic market at 98.61 with a 3.00% coupon to yield 3.31%, or 141bp over the government, after drawing demand of around UF6.4m. According to the issuer, the price equates to roughly 4.5% in dollars, and was reduced from an initial 3.5% yield target. The America Movil dollar-denominated 5.5% of March 2014 was yielding roughly 6.0% at the time, and the issuer scrapped a tabled CLP piece since demand was biased towards UF. Banchile-Citi managed the sale, which comes from a $1.2bn shelf and America Movil – one of the region’s most sophisticated issuers – says it plans to return to that market. The Mexican wireless provider claims it is the first “huaso” bond, or issue in Chilean currency placed directly by a foreign entity. Bankers explain that if conditions that allow for such pricing hold, Chile’s market wil