Brazilian Clinches HY Bond

Following a brief shutdown in the cross-border bond market last week, Usina Sao Joao Acucar e Alcool (USJ) has emerged, generating a $870m-plus book on a $275m 2019 NC4 bond. The Brazilian debut high-yield issuer priced at 98.768 with a 9.875% coupon to yield 10.125%, at the tight end of 10.375% guidance and mid-10% area whispers. “Good for investors getting a 10.125% yield, and as for the company, they were trying to extend maturities and willing to pay to extend debt of high yield secured terms with longer-term unsecured high yield debt. This is the right trade for them, as this will liberate the company and allow them to focus on their business plans,” says a DCM banker away from the BB minus/BB minus sale. He notes USJ coming at around 100bp inside B3/B/B rated peer GVO’s NC4 $300m 2018 bonds, trading to yield around 11%. The sugar, ethanol and bioenergy producer plans to use proceeds fro the sale to refinance up to 100% of existing short-term debt and up to 60% existing long-term debt and general corporate purposes. Credit Suisse, HSBC and Itau managed the transaction. This week could now see a flurry of new issuance activity, after several borrowers were on the road last week. Queiroz Galvao Oleo e Gas was targeting a $500m 2019 bond, at perhaps UST+500bp. Fellow Brazilian Sifco was to wrap up a roadshow Friday supporting a $200m liability management operation, swapping 2016 bonds for 2018, and Cielo is on the road this week ahead of an expected $750m-$1bn sale. Peru’s Southern Copper and Santander Mexico were also on the road last week, with the latter eyeing a 10-year benchmark.