Vale Plants Euro Benchmark

European investors clamored for a piece of Vale’s debut euro issue, despite pricing well through initial expectations. Orders for a EUR750m 8-year priced at 140bp over midswaps exceeded EUR8bn from almost 500 accounts, say bankers running the trade. A level around 160bp was initially expected, then squeezed to 150bp area whispers and 140bp-145bp guidance. Despite such a huge book, bankers working on the deal say that pushing through a 140bp spread would have stifled participation from the high quality investors Vale targeted. “Vale was looking for a tight benchmark and to develop a new investor base,” says a banker running the deal. “They wanted to leave something on the table to engage investors properly,” he adds. Bankers say that while a bigger deal was possible, Vale aimed to provide enough liquidity to make a benchmark, but does not need extra cash. The 2018 maturity handily plugs a gap on the curve, bankers note. The Brazil-based iron ore producer priced at 99.564 with a 4.375% coupon to yield 4.441%, or 160.3bp over Bunds. The Brazil sovereign was 115bp-120bp over midswaps, while comp Anglo American was 120bp-125bp at the time, says a banker on it. “It’s basically zero new issue premium to where Vale trades,” the official adds, pegging the Vale 2019 at around 150bp over midswaps. “Investors have treated Vale here as a mainstream asset, not an EM asset,” he adds, noting the high grade mining comps for the trade. Another bookrunner pegged Xstrata’s 2017 at 165bp, making Vale 25bp cheaper for an extra year’s maturity. There were no secondary levels late Wednesday, but all eyes are on trading performance. High grade real money and private banks were the main buyers, more than 90% of them in Europe. Bankers note a small but interesting participation from Asia, reflecting name recognition there. They say lack of US orders was down to tight pricing versus dollars. BNP Paribas, Credit Agricole, HSBC and Santander were joint bookrunners. Vale, which is rated Baa2/BBB+