CPFL Readies Debut Dollar Bond

Brazilian power generator and distributor CPFL is hoping to tap the USD market as early as July with its first cross-border debt issue, CFO Jose Antonio Filippo tells LatinFinance. The company is in informal, “non-deal” talks with investors and bankers to identify optimal structure for an issue of $300m-$500m in size. Tenor would ideally be 10 years, but 5 years would not be out of the question, says Filippo. The executive says he wants to avoid having to finance long-term projects with the short-dated money available to issuers in the local market. Two year debentures offer reasonable rates, he says, but going as far as 3 years already incurs substantial cost, he notes. Companies like CPFL would face rates of up to 120% of the CDI in the local market for 3 years, while rough estimates for 10-year money in the dollar market can be found at comparable rates prior to a swap, Filippo says. For CPFL, a swap back into BRL or a hedge would be a necessary part of the process, which would increase the all-in cost. Ten year funds for CPFL – which could potentially achieve a high grade rating, given its capital structure and sector – are quoted vaguely by bankers in the 8% area, Filippo says. CPFL says it got reverse inquiry from bondholders interested in a new issue during this week’s visit to New York. HSBC, Santander and Citi are among the banks Filippo says he is considering as intermediary. CPFL’s dollar tap would be used to pay down local debt and for capex, though its refinancing does not rely on any kind of new issue, says Filippo. Some $200m in BRL debt come due in 2009. Average tenor for CPFL debt today stands at around 4.5 years and the CFO says he would like to keep it at around that level. CPFL was recently rumored to be considering a bond to replace a BRL495m 1-year CP done in April.