Sugar Processor Tightens DCM Debut

Brazilian sugarcane processor Tonon Bioenergia has priced a $300m 2020 NC4 bond, increasing its cross-border debut from an initially planned $200m as investors filled a book that reached $1.4bn. Tonon was able to use investor demand for yield and an increase in risk appetite to ratchet down pricing from high 9%-area initial price thoughts to the tight end of 9.50%-9.625% revised price guidance. The B/B bond priced at 98.743 with a 9.25% coupon to yield 9.50%, and traded up around 3.0 points Wednesday afternoon, according to a trader. Tonon was thought to price flat to the 9.47% interpolated yield level of peer Grupo Virgolino de Oliveira’s (GVO) 2018 and 2022 bonds. “Despite Tonon being a smaller company, it is less levered than GVO and pricing flat to GVO made it look cheap,” says one investor looking at the deal. Tonon had net leverage of 2.6x versus GVO’s 4.9x net leverage, according to a report from Citi. More than 127 accounts participated and private banking and real money accounts were dominant in the book, according to people with knowledge of the sale. Buyers came mainly from the US, with some Europeans and limited Asian participation. Proceeds will be used to refinance approximately BRL281m ($133.5m) of existing secured debt and for general corporate purposes. BTG Pactual, Itau, and Santander managed the B/B sale. Tonon was founded in 1962 and sells VHP sugar, anhydrous and hydrous ethanol as well as other sugarcane byproducts. The company has a total crushing capacity of 5.7m tons per year, divided between its two Santa Candida and Visa Alegre mills. Private equity fund DGF Terra Viva owns a 48.4% stake in the company.