Investors Flock to New ICE Bond

Instituto Cosarricense de Electricidad (ICE) dived directly into pricing on its $250m 10-year Thursday after investors flocked to the rare credit, helping leads build a book that reached around $2bn in size. Whispering low to mid 7s earlier this week, leads essentially closed the books on Wednesday after receiving healthy demand and skipped guidance yesterday to launch and price at par to yield 6.95% or 488bp over UST. Viewed simply on its spread differential to the sovereign, ICE’s new bond was seen as extremely attractive to some investors who were also drawn to the credit’s rarity value, and quickly pushed the bond up close to 4 points in the after market. Some shops had the sovereign’s 9.995% 2020s trading Tuesday at 4.88%-4.71% on a yield basis, or at UST+272bp, making for an alluring spread differential. Leads, on the other hand, were heard spotting the same bonds at 285bp-305bp, calculating that a new sovereign 10-year would come at 315bp-335bp and putting the spread to ICE’s new bond at around 163bp. Other sovereign-to-quasi differentials vary from country to country, and from credit to credit. For instance, in Brazil, quasi sovereign utility Eletrobras 5.75% 2021s have been trading with 185bp differential, while in Colombia the spread is around 165bp for a credit like EPM. Assuming Costa Rica was penalized somewhat against its other quasi peers for not being eligible for index inclusions, leads were heard calculating a 10bp-30bp new issue premium. Citi and Deutsche Bank managed the sale, rated Baa3/BB+, the issuer’s first cross-border deal since 2004.