Falabella became Chile’s first corporate borrower to sell a global peso transaction in late April, adding a $200 million-equivalent tranche to a $500 million dollar bond. The triple-B rated borrower paid a reoffer yield of 6.5% on the peso tranche and 3.861% for the dollars. The deal came amid a busy March and April for Latin America’s debt markets, and followed a handful of global real transactions.
Cosan raised $750 million in a dual currency deal in early March. Investors placed $9 billion in orders for the debt from the energy and infrastructure company. It sold a 500 million real ($252 million) 2018 tranche to yield 9.625%, alongside the initially planned $500m 2023 tranche, which is callable in 2018 and was priced to yield 5.15%. “Conditions are ripe for Brazilian corporates to issue in reais,” Cosan chief executive Marcos Lutz told LatinFinance.
Banco ABC Brasil (Baa3/BBB-) and Odebrecht (Baa3/BBB-/BBB-) followed Cosan into the real market.
High-yield borrowers had a busy couple of months. Junk-rated sovereigns and corporates raised $15.04 billion in the year to April 19, according to Dealogic, up from $8.93 billion issued in the same period last year.
Colombian lender Banco GNB Sudameris (Ba1/-/BB+) sold a $300 million five year bond yielding 4.125% in late April, taking $800 million in demand. That came a couple of days after Brazil’s Construtora Andrade Gutierrez (Ba1) debuted with a heavily-subscribed $500 million deal of the same tenor, yielding 4.125%. Peru’s Ferreycorp also met strong demand for its bond debut. The Ba1/BB+ rated holdco raised $1.6 billion of orders for the seven non-call four year bond, which was priced to yield 5%.
The buyside also welcomed Digicel’s (B1/B) 6% $1 billion eight year non-call three senior unsecured bond, which it tapped a month later for $300 million. The single-B Caribbean telecommunications carrier bought back $262.6 million of 12% 2014 notes, in a cash tender offer.
Mexico’s Cemex also turned to liability management. The cement maker offered to buy back €200 million of a 4.75% 2014 bond at the same time as it sold a $600 million B/B+ senior secured 2018 at par to yield 5.875%.
Not every high-yield corporate issuer had easy access, though. Brazil’s Aralco postponed its bond debut in mid-April, citing poor market conditions. The single-B sugar and ethanol producer had been looking for a yield around 9.5% for a seven non-call four.
Mexico breaks euro silence
Having waited for euros to become cost-effective, Mexico drew more than €4.5 billion of demand and priced through its euro curve with its first bond in the currency since 2010. The €1.6 billion ($2.01 billion) 10-year was priced to yield 2.809%, equal to 120 basis points over mid-swaps. “For us to come to the euro maket is an important part of our strategy of funding in dollars, euros and yen,” public credit head Alejandro Díaz de León told LatinFinance.
New sovereigns also emerged, hoping to follow high-yielders like Paraguay and Bolivia which recently found demand at previously unthinkably low yields. Honduras debuted in early March, raising $500 million. The B2/B+ issuer overcame the disclosure of a New York lawsuit and the loss of a bookrunner to draw over $1.75 billion in demand. The 2024 bond was priced to yield 7.5%, offering a pickup to Dominican Republic’s (B+/B/B1) 2023 bond.
DomRep itself was also in the market, selling a $1 billion bond – its largest ever. Demand reached $6.5 billion, allowing the borrower to tighten pricing to 5.875% yield. Bolivia, meanwhile, has mandated for another international bond sale.
The state of Minas Gerais sold a note with an innovative structure that gave international investors rare access to Brazilian state-level debt. The amortizing bond with a 10.2-year average life was issued through special purpose vehicle Brazil Minas SPE. A loan from bookrunner Credit Suisse to Minas Gerais is the underlying asset. Brazil Minas SPE bought the loan and in turn issued the pass-through notes.
The borrower sold the $1.27 billion 2028 security to yield 4.216%, equal to 230 basis points over US Treasuries. Investors placed $3 billion in orders for the federal government-guaranteed bond. Analysts say the RegS-only format could be a source of financing for other Brazilian states. Mato Grosso and Santa Catarina have similar international loans, and Paraná is in the process of finalizing a 1.1 billion real ($550 million) loan. LF