Itau Makes Tier 2 Splash

Itau has sold $1bn in 2020 Tier 2 bonds to mark in its first public overseas sale since the 2008 merger with Brazilian rival Unibanco. The order book topped $2.5bn, according to bankers on the deal, with investors generally viewing the price as fair. The bank sold the Baa2/BBB minus deal at 99.552 with a 6.200% coupon, to yield 6.261%, or US Treasuries plus 237.5bp, the tight end of 237.5bp-250bp guidance. The bond traded at around reoffer Wednesday afternoon, according to investors. “If you think it will trade inside of Bradesco [2019 Tier 2], there may be some upside,” says a participating London-based EM fixed income investor. He adds that it was priced fairly, with perhaps 1-2 points of upside. BBB/Baa3 rated Bradesco’s 2019 Tier 2 bond traded in the mid 220bp area Wednesday, according to investors. Bankers away from the trade say it was appropriately priced, considering both Itau’s relatively long absence from markets and the amount of Brazil bank supply recently. Bankers running the deal through Itau-Unibanco Holding Cayman Islands say it is the largest-ever Tier 2 bond from LatAm. Close to 200 accounts participated, with significant Asian participation, as well as retail and high-grade dedicated buyers. Itau, Goldman Sachs and Morgan Stanley managed the sale, which follows a roadshow covering the US, Europe and Asia. It was Itau’s first public dollar bond since 2005, the year in which Unibanco issued a $500m perpetual, according to Dealogic. The parade of Brazilians seeking Tier 2 capital shows no sign of abating, with Banco Panamericano and BicBanco teeing up. Mexico’s BBVA Bancomer is also heard looking to raise subordinated debt.