Vale Raises Tight Long Funds

Vale has emerged with a tightly-priced $1.5bn 2042 bond, allowing the issuer to secure capex funds at attractive rates. The Baa2/BBB+/A minus transaction drew more than $4.5bn in demand. The new benchmark priced at 99.198 with a 5.625% to yield 5.625%, or UST+300bp, in line with 300bp-area guidance, that had come in from 310bp whispers. The bond was heard trading at 0.40-0.60 points in the grey late Tuesday. Vale’s 2039s were trading at UST+290bp pre-announcement, which bankers on the deal say is equal to 301bp on an interpolated basis, suggesting a pricing flat to the 2039. Despite the attractive levels, some questioned the timing of the transaction, given the widening of Vale’s bonds as of late, versus tighter levels earlier in the year. “If the company doesn’t need debt, why are they flooding the market with supply after bonds took a hit?” asks an EM investor following the transaction. Bankers on the deal note that while mining sector bonds have widened out in the secondary markets over the last couple of weeks, due to macroeconomic conditions and China’s slower growth, treasury rates are attractive enough to warrant the visit to the market and price a deal they describe as getting Vale’s lowest yield for a 30-year issuance. They also point to Vale’s strong capex needs, which the proceeds will help fund, along with contributing to general corporate purposes. Roughly 50% participation came from the US, 33% from Europe, 10% from LatAm and 7% from Asia. Fund managers took roughly 60% of the transaction, private banking 15%, and hedge funds 12%, with the rest allocated to insurance, pension funds and other investor types. JPMorgan, Citi, Bradesco, Banco do Brasil and Santander led the transaction, which follows Vale’s EUR750m ($949m) 2023 issuance last month. Last week, the miner agreed to sell 10 transport ships to Polaris Shipping, raising $600m.