Odebrecht Raises $1bn

Brazil’s Odebrecht emerged with its largest-ever and longest-dated debt issuance, raising $1bn in new 10 and 30-year bonds. The deal saw an initial demand of $6bn, with books settling at the end of the day to around $4.5bn between both tranches, including $1.5bn for the 30-year. Initially announcing a benchmark 2022 at 5.40% whispers, the issuer later emerged with 5.25%-5.375% guidance before revising to 5.20% (+/- 5bp) later in the day, and surprising the market by tacking on the $300m 2042 tranche. The builder and engineer later upsized the 2042 to $400m at 7.25% (+/- 5bp) guidance, with half of the size heard backed by reverse inquiry. The $600m 2022 priced at 99.421 with a 5.125% coupon to yield 5.200%, and the $400m 2042 priced at 98.479 with a 7.125% coupon to yield 7.250%. The shorter bond was up 0.375 points in the grey Thursday afternoon, and the longer up 0.50-0.75 points, according to a trader. “The deal was good for Odebrecht as it was able to create a credit curve on the long end and extend maturities,” says an analyst following the transaction. The lead managers were heard calculating a 5bp-10bp new issue premium for the 2022, based on a 5.15% pre-announcement yield on its 2023 bonds plus a few additional bps for the 1-year difference. It was more challenging to find a useful reference for the 30-year, though some market participants looked at Braskem and Grupo Votorantim 2041s, trading to yield in the low 7%s Thursday, as general reference points. Proceeds from the 10-year will be used for additional equity investments in its subsidiaries, while funds from the 30-year tranche are destined to pre-fund the call of its 2017 bonds, general corporate purposes and additional equity investments. The Baa3/BBB minus senior unsecured bonds issued through Odebrecht Finance are guaranteed by Construtora Norberto Odebrecht. Credit Suisse, Itau, JPMorgan and Santander led the transaction.