Chile returned to the international capital markets on Wednesday to raise $1.75 billion in the sale of five-year US dollar-denominated social bonds, market sources told LatinFinance.
The sovereign priced the 4.85% 2029 notes at 99.903 to yield 4.872%, or 85 basis points over US Treasury bonds. It opened the initial price talk earlier in the day at around 120 basis points and set guidance at around 90, plus or minus five basis points, before launching the deal, a sell-side source said.
Chile was able to tighten the spread by 35 basis points given that it has a better credit rating than other Latin American sovereign issuers, the sell-side source added.
Lazslo Lueska, a partner and portfolio manager at São Paulo-based investment firm Octante Capital, said the pricing was “at fair value.”
Chile had set out to sell between $1 billion and $1.5 billion worth of the notes, but it increased the size of the deal after investor demand peaked at just above $10 billion before coming down to $8.4 billion after the final guidance, according to Lueska.
“Demand came mainly from American institutional [investors], as well as local institutional [investors], insurance companies and pension funds,” Lueska added.
Bank of America, HSBC, J.P. Morgan and Société Generale were joint bookrunners on the bond sale, according to the sources.
The Chilean government plans to use the proceeds to fund eligible social projects under its sustainable bond framework, such as providing access to education, healthcare services, affordable housing and food security, it said in a prospectus filed with the US Securities and Exchange Commission.
Fitch Ratings affirmed Chile’s A- rating with a stable outlook in December based on the sovereign’s strong balance sheet, solid governance indicators and a track record of credible policies centered on an inflation-targeting regime and flexible exchange rate. Chile’s government debt-over-GDP ratio is well below its peers, according to Fitch.
Chile last issued social bonds in May last year, when it added CLP1.75 trillion ($1.9 billion) to its 6% 2033 peso-denominated notes.
Chile’s Finance Ministry said in a statement earlier this month that it plans to sell up to $16.5 billion in bonds as part of its financing plan for this year, aiming to issue roughly 66% worth of debt in local currency and 34% in foreign currency. The ministry added at the time that it would continue to reinforce its commitment in issuing environmental, social and governance instruments, as well sustainability-linked notes.