Strong investor appetite for Latin American debt in the first half of the year proved a boon for some first-time Andean borrowers. Chilean power transmission company Celeo Redes capitalized on the buoyant sentiment, becoming the first project bond issuer from Chile to simultaneously tap international and local markets.
In May, Celeo Redes raised $600 million in a two-part deal that some financiers say may become a model for other transactions in the region. The $379 million cross-border bond portion was priced to yield 5.2%, and the $221 million in inflation-linked local Unidad de Fomento (UF) notes yielded 2.99%.
“We initially thought of doing just a single issuance in New York,” says Celeo CFO Santiago Oraa Gil. “But we eventually realized it wasn’t going to be competitive. So we decided to go with a dual-market transaction. We knew it would pose some challenges, but we also knew it was the best path forward.”
Celeo’s successful debut placing long-term debt in concurrent transactions makes the financing package stand out as the winner of the awards for Best Power Financing, Best Bond and Best Infrastructure: Andes.
The debt is backed by three of Celeo’s power transmission lines, two of which are operating and another that is expected to be up and running soon. The cross-border bonds are secured by cash flows from the transmission lines and rank pari passu with the local notes.
The company’s decision to raise a portion of debt in UFs lowered its foreign exchange risk. Spanish engineering company Elecnor owns 51% of Celeo, with the rest held by Dutch pension fund Algemene Pensioen Groep.
Order books for the international paper reached $1.4 billion. US investors accounted for nearly 70% of demand, followed by Latin American investors with 23% and the rest from Europe and Asia.
BBVA, Goldman Sachs and JPMorgan coordinated the cross-border trade, while BBVA was the sole bookrunner on the UF deal.
The success of the offering has opened up new financing approaches, says Oraa. “Thanks to this transaction, we now know we can go to more sophisticated funding, so we can be more competitive on future projects.”
Oraa says Celeo is focusing on securing the permits it needs to grow its transmission platform. “That will likely take a couple of years,” he says.
“Once we resolve this, we’ll go back to the capital markets,” he adds. “This bond can be reopened to raise debt for new projects. In the end, this transaction was much bigger than we expected. There was no precedent for this kind of issuance when we went to the market, and we found a lot of willingness to buy this kind of risk.” LF
COMPANY: Celeo Redes
FINANCING TYPE & SIZE: $379 million cross-border bond, $221 million UF note
BANKS: BBVA, Goldman Sachs, JPMorgan
LAW FIRMS: Claro & Cia, Mayer Brown, Milbank, Garrigues