The Republic of Brazil ended a 12-year absence from the European bond market on Wednesday, raising EUR5 billion ($5.9 billion) with a three-part deal that generated strong demand.
The sovereign priced EUR2 billion worth of 4% 2030 bonds, EUR1.5 billion worth of 4.875% 2033 notes and EUR1.5 billion in 5.5% 2036 bonds, according to a source familiar with the deal.
Investors placed over EUR15 billion in orders for the three series of notes, according to two market sources.
The government sold the 2030s at 99.134 to yield 4.24%, or 145 basis points over mid-swaps, after opening the initial price talk at around 180 basis points, the source said.
It sold the 2033s at 99.098 to yield 5.031%, or 210 basis points over mid-swaps, after opening the bidding at around 245 basis points. The 2036s priced at 99.049 to yield 5.627%, equal to a spread of 255 basis points, after it started the bidding at around 290 basis points, the person added.
BBVA, BNP Paribas, Bank of America and UBS were joint bookrunners on the deal.
The deal was “clearly successful” from an execution perspective as attractive IPTs generated strong demand and allowed spreads to be tightened by 35 basis points, said Viktor Szabo, a money manger at Aberdeen Investments in London.
The Brazilian government, which held a non-deal roadshow with investors in London last week, said the placement represented its biggest-ever international bond deal.
HUNGRY BUYERS
Finance minister Dario Durigan said Brazilian corporates may follow the government’s lead back to the European market.
“The offer we saw was much larger than we expected,” he told reporters on the sidelines of the IMF spring meetings in Washington, DC.
Aberdeen’s Szabo said that it makes sense for Brazil to continue diversifying its investor base with euro bonds, “particularly at a time when many global investors are looking to reduce the share of dollar assets in their portfolios.”
The country’s last European placement was in March 2014, when it printed EUR1 billion worth of seven-year bonds.
“More broadly, continued diversification away from local-currency floating-rate debt would further improve Brazil’s debt profile and reduce sensitivity to domestic rate cycles,” Szabo added.