CAF Jumps through Issuance Window

CAF took advantage of a market rally to print a new $600m bond Thursday, the first step in a liability management operation. In a deal following Swiss and Hong Kong issuance last week, the A1/A+/A+ Andean multilateral drew more than $2bn in orders, and got a tiny new issue premium. “The timing was perfect and resulted in a good transaction,” CFO Hugo Sarmiento tells LatinFinance, noting that the sovereign saw a window of opportunity amid recent volatility, for what is typically its annual visit to the dollar market. The 2022 bond priced at 99.225, with a 4.375% coupon, to yield 4.472% or UST+282.5bp, at the tight end of 287.5-area guidance, which followed 300bp talk. “It was too tight at 10bp-15bp on top of the 2019s.This is a credit that is liked and bought by insurance companies, which don’t mind the flatter curve,” says a West Coast EM portfolio manager. Sarmiento says CAF offered zero to little new issue premium, after spotting the 2019 bonds at UST+270bp on an interpolated basis and adding 20bp for the curve extension from 7 to 10 years. Demand was heard driven by US institutional accounts (50%), with participation from Europe (30%) and Asia and Latin America (20%). A total of 138 accounts participated, including institutions, private banking, retail and insurance. At the same time, CAF has launched an offer to exchange its existing 8.125% 2019 and 5.750% 2017 bonds for more of the newly issued 2022 bonds. Accepting holders are to get $1,278 for each $1,000 tendered of the 2019s and $1,135.91 for each $1,000 of the 2017s, in an offer closing Tuesday. Deutsche Bank, Goldman Sachs and HSBC managed the bond sale and are handling the exchange offer. Last week, CAF issued a CHF175m ($180m) 2.5-year floating-rate bond at par with a coupon of 3-month Libor+145bp, through Credit Suisse. It also tapped the Hong Kong market for HKD398m ($51m) in 12-year bonds priced at par with a 4.00% coupon, via Goldman Sachs.