Vale Diversifies Into Euro Debt

Vale is diversifying its funding base with a debut euro-denominated bond next week, fuelling talk of a revival in LatAm issuance to Europe. The deal is a strategic move for the iron ore giant, say bankers leading it, with volume not the main objective. Size and tenor of the new deal should be finalized in meetings with the buyside next week. “The euro market is available, and there is appetite. Whether there is appetite for Vale depends on their marketing,” says a London-based investor managing more than $1bn in debt who is planning to meet the borrower. However, tapping euros might cost Vale 15bp on a swap basis, notes the buysider, though the real value lies in accessing new accounts. Both investors following the deal and bankers say the euro market could accommodate a benchmark-sized transaction, of at least EUR500m in size. A 3-team roadshow begins in London, Germany and Switzerland Monday, visits Paris, London and the Netherlands Tuesday, and finishes Wednesday with a global investor call. BNP, Credit Agricole, HSBC and Santander are managing the Luxembourg-listed sale, which is rated BBB/ Baa2/BBB+. Vale says it will use proceeds for general corporate purposes, including capex, liability management, and possible acquisitions. Barclays sees increasing involvement from investors pricing Vale versus international peers such as Rio Tinto rather than the Brazil sovereign, which should lead to curve tightening. Vale last issued debt in November, with a $1bn sale of 6.87% coupon 2039s yielding 6.99%. The last LatAm issuer in euros was Cemex, with EUR350 in 9.625% of 2018s NC4 in December. In September, Pemex got EUR1bn in 2017s to yield 5.62%, claiming pricing of 5-10bp through the dollar curve in the first non-sovereign LatAm EUR-denominated bond since 2005. “As Latin sovereigns and high-quality corporates sense that the euro space is open, this transaction could pave the way for other issuers,” says the London-based investor. Petrobras is likely among other LatAm i