Latin American corporate issuers are increasingly buying back outstanding bonds in an effort to reshape their debt profiles, LatinFinance understands.
Volatile conditions have effectively shut out many corporates from making new issues in both the debt and equity markets. But companies are assessing other ways to address existing debt levels and distressed companies are looking at deleveraging tactics.
Liability management trades remain open to corporate issuers, and more deals are expected to make it to the market in the next few months, said one liability management banker.
At least five Latin American corporates have initiated bond buybacks so far this year, with two more issuers – Santander Chile and Hypermarcas – recently adding their names to the list.
Santander Chile, the Chilean subsidiary of Spanish bank Santander, made a cash tender offer to buy back up to $500m of $1bn in outstanding bonds. The bank has $750m outstanding in 3.875% senior fixed rate notes due in 2022 and $250m outstanding in senior floating rate notes due in 2018.
The bank offered the fixed rate noteholders a payment based on the US Treasury bond yield on March 2, while it offered the floating rate noteholders $1,002.50 for every $1,000 in principal through the early deadline on March 1 and then $952.50 for every $1,000 through the final deadline of March 15.
Citi is managing the offer, with Deutsche Bank and Santander itself as the other dealers. Santander Chile said the offer was designed to provide liquidity, while offering bondholders a chance to exit their investments.
Hypermarcas is also using a bond buyback to clean up its debt curve. The Brazilian consumer goods company offered to buy back any and all of its $312.6m 6.5% 2021 bonds, which are short-term callable on April 20 at 103.25.
Hypermarcas offered to pay $1,038.50 for every $1,000 in principal through the early deadline on February 26 and $1,008.50 for every $1,000 in principal through the final deadline on March 11. The Ba2/BB/BB+ rated company also said it asked bondholders to agree to remove restrictive covenants from the contract. Citi is the dealer manager for the offer.
Latin American sovereigns have also been active in the liability management space. Chile last month used the dollar proceeds from cross-border bonds to fund a cash tender offer to buy back some of its 2020, 2021, 2022 and 2025 bonds. Investors holding $3.295bn in the four series of Chilean global notes were given the option to switch into a new 10-year dollar bond or take cash.