Cencosud Plays DCM Debut Safe

Chile’s Cencosud has raised $750m in new 2021 bonds, marking its dollar debut. The Baa3/BBB minus Chilean supermarket chain decided to play it safe in its first cross-border deal. It had been heard initially considering up to $1bn size and mulling a global peso tranche. The bond priced at 98.783 with a 5.500% coupon, to yield 5.661%, or UST plus 230.0bp, the tight end of 237.5bp guidance but wide to the 225.0bp it had first whispered. Demand for the deal reached $2.6bn, according to bankers on it. It traded up slightly Wednesday afternoon, according to investors. The enthusiasm to be expected for an investment-grade Chilean dollar debutant appeared to be somewhat dampened by concerns about ambitions capex, high leverage (3.3x, estimates Barclays) and 30% Argentine exposure, investors say. However, they see the bond as fairly priced, with little potential for tightening. “We see 20bp-30bp of upside potential from issuance levels,” says Barclays. The bank compares Cencosud to US BBBs Kroger and Safeway, which trade at UST plus 110bp and 135bp, respectively, and notes that the Chilean sovereign is UST plus 70bp. “The [230bp] level is fair, but not a compelling price,” says a West Coast EM investor who looked at the deal. He notes elevated leverage and questions about expansion plans, but sees room for 15bp-20bp tightening. Proceeds are marked for debt refinancing and general corporate purposes. Deutsche, JPMorgan and Santander ran the sale, done at the Cencosud SA holdco level, and guaranteed by the Chilean Cencosud Retail SA operating company. Cencosud operates 667 stores in Chile, Argentina, Brazil, Peru, Colombia. This includes Chile’s Jumbo and Santa Isabel supermarkets, and Brazil’s Bretas, acquired in October for BRL1.35bn.