CAF Eyes Sterling, USD

Regional development bank Corporacion Andina de Fomento (CAF) is heard considering a return to the dollar or sterling markets, according to a buyside source who was briefed on the multilateral lender’s plans. The supranational is heard considering a new 10-year USD in addition to gauging fixed-income investor appetite for a new sterling issue. “If they issue in sterling, CAF will probably have to pay another 15bp over the fair basis swaps level to get a transaction in sterling as there is an illiquidity premium attached to sterling issues though it is a high quality single A,” says the investor. Deutsche Bank is one of the banks heard working with CAF on the process. Bankers away from the process say that while CAF’s dollar bonds are performing well in the secondary – its 2022 bonds were trading at 3.30% Monday afternoon – it makes sense for CAF to diversify its investor base even if it has to pay up. “Sure the sterling market is more expensive than the dollar markets, but CAF can’t continue issuing in USD. It behooves them to look at other currencies even at a bit more of a cost,” says one banker. CAF took advantage of a recent ratings upgrade to raise CHF300m ($313m) in the Swiss market in early August. The multilateral lender’s director for financial policies and international issues, Gabriel Felpeto, told LatinFinance last month that CAF continues to analyze the USD, EUR, GBP and JPY markets, and did not rule out more CHF bonds before the end of 2012 as it seeks to diversify its funding sources. CAF is rated Aa3/A+/A+.