Chilean DCM Hopes for Sub-A Expansion

Chile could see more domestic bond issuance from companies rated below A on a national scale, following a recent UF2m ($87m) placement from BB+/BBB Chilean retailer AD Retail. According to leads IMTrust, the sale is the first for a local corporate issuer with a BB+ national scale rating “It’s a good sign that the market is open to these kinds of grades,” Francisco Del Rio, deputy CFO for the company, tells LatinFinance. “That is very important because in Chile the bond market is very liquid for investment-grade issuance,” he says. Due to regulatory limits, pension funds and insurance companies cannot venture too far down the credit spectrum, but there is growing group of investors, such as family offices, which are willing and able to do so. AD Retail is seen as proof of this. The 9.5-year bond, AD’s first in the local market, priced at par with a 6.05% coupon, and comes after a lengthy delay thanks to the fallout from troubles at retailer La Polar. AD had hoped to sell bonds in the public markets last March, but opted instead to arrange a short-term private placement among investors who paid the same interest rate. IMTrust also arranged this initial deal, which involved a number of life insurance companies, banks and family offices, encouraging investors to participate in the recent bond. “It’s a good sign that the market is open to these kinds of grades,” Del Rio says. Post-issuance, the paper has seen some trading in the secondary market, showing a market exists for these kinds of instruments, Del Rio adds. AD specializes in consumer electronics and home decorative products, under the ABCDIN name.