Colombia to Engage Investors

Colombia will kick off fixed-income investor meetings next week as it seeks to showcase its new status as a fully-fledged investment grade credit and tell the world about the fiscal reforms that the new administration has achieved since entering office in August 2010. With the sovereign truly shedding its junk status earlier this month when Moody’s awarded it a second investment-grade rating, the government can now appeal to a broader set of investors amid expectations that it will soon tap the international capital markets. Bankers think that the government enjoys a wide array of financing options, including dollars bonds, Global COP and even perhaps liability management. However, in light of its absence from the dollar market since 2009 and the obvious gap in the mid-point of its curve, some bankers are betting it may simply try a new 10-year benchmark bond. Indeed, the government has yet to cover any of its $2.24bn in external bond financing needs for 2011, so this may be a good place to start, say bankers. Should it take the dollar route, Colombia could in theory lock in what would be its lowest-ever coupon, market conditions permitting. Late Thursday afternoon, for instance, the country’s 7.375% 2019s were trading at around 3.69%-3.76% on a yield basis or 84bp-77bp over UST. With the sovereign enjoying such tight spreads, one senior banker thought Colombia could aspire to printing a new 2021 as tight as 125bp over, and perhaps even achieve a coupon in the 4s. That would beat its last record tight coupon in 2009 when it printed a new 6.125% 2041. A return to the global COP market is another possibility, and the senior banker calculated it could perhaps create a new 30-year benchmark along that curve at 7.75%. A global COP tap could also be combined with some liability management given the high coupons on some existing instruments. “The reality is they are paying a high 12% coupon on the global COP ‘15s,” he adds. “They could just take them out and put investors