EPM Set to Price 2019

A $500m 2019 bond from Empresas Publicas de Medellin was looking at more than $4bn in orders as of late Tuesday, investors say, and is expected to price today. The municipally-owned Colombian utility issued yield guidance at 8.0% area Tuesday morning, and indicated that the size would not grow. The talk on what is to be EPM’s first bond in international markets was in line with investors’ expectations, following Monday whispers of low 8% area. It puts the trade 160bp-180bp wide of the sovereign 2019s. Last week, compatriot Ecopetrol’s 2019s got 7.677% yield, or about 100bp wide to Colombia. RBS in a research note puts fair value of EPM notes at 8.10%-8.40%, noting low leverage (0.9x) and lack of structural subordination of cashflows. This makes it about 50bp-60bp tighter than Empresa de Energia de Bogota’s 7-year 2014 on a duration-adjusted basis. Execution of EPM’s $4.9bn 6-year investment plan is the credit’s main risk, RBS says. The official use of proceeds is general corporate purposes, with EPM having communicated its intentions to grow significantly in Colombia and abroad. Bank of America-Merrill Lynch and JPMorgan are managing the transaction, rated Baa3/BB+.