Continental Sheds Spanish Doubts with Upsized Deal

Peru’s BBVA Continental sold $500m in new bonds Tuesday, upsizing from an expected $300m and defying pushback seen earlier this week. While Continental’s ties to its Spanish parent and the expectations of more bank supply had left some investors expressing doubts about the issue, the deal gained enough moment to generate a healthy $1.8bn book and the participation of some 20 plus accounts. The bond traded at plus 0.70 in the aftermarket, according to an investor. The BBB/BBB plus 144A/RegS bond priced at par to yield 5.75% or UST plus 490.7bp. This comes one day after BBVA Continental emerged with 5.875% area guidance following whispers of 6%. Mainly comped against BBVA’s illiquid 2020 bonds, new issue premium estimates varied widely from 35bp-75bp, with those bonds spotted around 6% pre-announcement. Some investors found the deal priced cheap to its curve, but not relative to similar banks in other countries. Proceeds will be used to fund bank operations. Pricing of the transaction, originally scheduled for Monday, was carried overnight because Spain’s BBVA Group first had to announce a $1.3bn write down of goodwill charges on its US operations on the back of lower-than-expected growth. The BBVA Group says the write-down will not impact cash flow generation or liquidity and will result in a EUR400m positive impact on core capital of the group because of tax treatment of goodwill. BBVA, Goldman Sachs and JPMorgan managed the 144a/RegS transaction. The bank last came to market in November 2010, when it priced a $300m 2020 at 99.220 with a 5.500% coupon to yield 5.603%. S&P recently upgraded Continental to BBB from BBB minus following a similar move for the sovereign last month.