Chile Taps Tight Dollar Funds

The Republic of Chile has raised $1.5bn during its first visit to the dollar markets this year, landing what the issuer calls the lowest-ever coupon and yield for an emerging market bond at the 10 and 30-year points. “It’s a very strong credit. No new issue premium and difficult to see much value in such tight spreads. Even so, the book was hugely oversubscribed,” says a North American EM portfolio manager following the process. Indeed, demand for the 10-year tranche reached $4.1bn while the 30-year saw $4.8bn, with each getting approximately 300 accounts to participate. The $750m 2022 priced at 98.858 with a 2.250% coupon to yield 2.379%, the tight end of UST+60bp-area guidance which followed UST+75bp-area whispers. A $750m 2042 priced at 98.398 with a 3.625% coupon to yield 3.714%, the tight end of UST+80bp-area guidance following earlier UST+95bp whispers. The bonds were quoted trading up 0.30 in the grey, after being up as much as 0.50 earlier in the day, according to investors. “In terms of trading in the grey, it tells me they tightened to the right point. Like everything else these days, they priced extremely tight,” says a second EM investor. Chile revisited the debt capital markets with the objective of developing its yield curve and issuing a long-end reference benchmark for future corporate Chilean borrowers, as well as to pre-finance at low rates. Bank of America Merrill Lynch, HSBC and JPMorgan managed the A+/Aa3 rated transaction. Further investment-grade sovereign issuers are expected to emerge, investors say, with Brazil tipped to possibly return before year-end or early 2013 to retap its 2023 and bring it closer to a $3bn targeted benchmark size. Uruguay is another candidate mentioned by the buyside that could take advantage of low rates.