Intercorp Tests High-Yield Appetite

Peru’s Intercorp Retail Trust (IRT) priced a $300m 2018 bonds Monday after watching the book grow to some $650m in size. The deal generated its fair share of interest given it was one of the few sub-investment grade credits to hit the LatAm market in recent months. Investors had fretted about IRT’s credit metrics – total adjusted debt to Ebitdar of around 5 x—as well as its holdco status, but its ability to get a deal done in what remains an uneasy backdrop holds out hope for other high-yield names waiting in the pipeline. Part of the IFH Group, IRT is the holdco for a financial company, department and improvement stores, as well as a supermarket and pharmacy chain. The B1/BB minus rated issue priced at par to yield 8.875%, in line with earlier guidance and had been trading in the grey at +0.25 to +0.875 above reoffer. Final pricing equated to a spread differential of some 27bp over the parent company’s existing 8.58% 2019 bonds trading at UST+715bp on a yield-to-worst basis. Investors were also heard looking at the pick-up to similarly rated Peruvian credit Inkia Energy’s 10NC5 (BB minus/B1), which was being quoted at around 675bp over. Participation mostly came from US asset managers and insurance companies, private banking in Latin America and Switzerland with some hedge fund participation. Proceeds are be used for a combination of debt refinancing and capital expenditures. Bank of America Merrill Lynch and JPMorgan led the transaction.