CAF Brings Generous Jumbo

The highest rated LatAm issuer, CAF, delighted investors Thursday with a generously priced and well bid $1bn 10-year, its biggest bond issue to date. The A+ rated development bank priced at 99.825 with an 8.125% coupon to yield 8.151%, or 450bp over US treasuries. CAF started the morning whispering mid-400s on a benchmark sized deal and launched at 450bp. Investors had expected a deal after CAF’s filed this month a $1.5bn shelf, but they were surprised by such a large size – double any of the Andean multilateral’s previous issuance – and found yield above 8% attractive for an A+ credit. The new issue was trading up 1-2 points in the gray Thursday afternoon, say bankers away from the deal, implying cheap pricing. “They played it safe and left about 10bp-20bp on the table in order to get a good execution,” says a US-based EM dedicated investor. Bankers away from the transaction put the concession somewhere between 30bp-50bp, calling that reasonable considering size and the choppy trading in outstanding bonds. The book reached more than $3.5bn from 160 accounts, according to bankers on the deal, who say it was the issuer’s broadest ever distribution. Some 65% was EM and the rest high grade. Proceeds from the sale will go to general corporate purposes, including funding lending operations. Bank of America-Merrill Lynch and Credit Suisse managed the transaction. CAF last hit the dollar markets in January 2008 with a $250m 5.75% 2017 via Credit Suisse, Merrill and HSBC. Its largest issue before Thursday was a $500m 5.2% of 2013 bond, sold in 2003 through Merrill, CS, Deutsche Bank and Goldman Sachs. This year, it has sold COP240bn ($95m) in 2014 and 2019 bonds in Colombia in April, and JPY10bn ($108m) in 2019 bonds with a single Japanese investor in February.