BNDES Sacrifices Size for Pricing

Brazilian development bank BNDES was thought to have sacrificed size for tighter pricing Wednesday after it printed a CHF200m ($239m) 5-year bond at 99.674 to yield 2.818%, or mid-swaps plus 140bp, in-line with guidance. Size came lower than the CHF250m some investors were hearing during roadshows last week, but the borrower was seen satisfied with the comparatively attractive spread and happy to settle for a smaller amount. “We could have done up to $1bn, but having a well priced benchmark is more important than taking size out of the market,” says a banker familiar with the deal. Swiss-based institutional investors and private banking accounts represent the bulk of the 40 orders. Yet with BNDES’s 4.25% EUR 2017s trading wider some investors declined to participate and maintain their current exposure to the BNDES name. “The credit is attractive but with the EUR [bond] yielding mid-swaps plus 165bp, mid-swaps plus 140 on today’s bond looks less attractive,” says a BNDES holder of its USD and EUR debt who decided to pass on the latest issue. The CHF tap is part of BNDES’ plan to diversify its investor base and comes in line with former issues done in USD and EUR. Andean multilateral CAF’s 2015s was considered a close comp which priced at the same mid-swap plus 140 bp range. The credit’s quasi-sovereign status and Brazil’s recent upgrade by Moody’s to Baa2 from Baa3 helped the development bank achieve a coupon usually reserved for corporates outside the EM universe. Such pricing may encourage other EM borrowers to follow suit. “If the low interest rate environment locally continues, this should be more and more an available market for high quality EM issuers,” another Swiss investor says. The Baa2/BBB bank last issued in the Swiss franc market in 2007 when it raised CHF150m through Credit Suisse. BNP Paribas and Credit Suisse acted as leads on this issue.