LATAM WRAP-Uruguay tests appetite for new LatAm supply
By Paul Kilby
NEW YORK, Oct 19 (IFR) - Uruguay broke a two-week lull in the LatAm primary market on Monday when it announced an up to US$1.7bn sale of new 2027s to retire off-the-run bonds.
The deal comes amid an unsteady backdrop for emerging markets after data showed that Chinese growth dipped below 7% for the first time since the financial crisis.
"The tone has been better ex-Brazil, but this is still really a market for sovereigns and quasi sovereigns (only)," said a senior banker away from the deal.
Playing it safe, leads initially offered a generous new issue premium of 45bp-55bp on initial price thoughts of 265bp over Treasuries. This level was tightened at guidance to 250bp (plus/minus 5bp) with books heard hitting around US$2.3bn.
"We think fair value is 240bp area," said a syndicate banker away from the deal. "Anything past that would be surprising."
The deal is being done in conjunction with a one-day cash tender for outstanding 9.25% 2017s, 8% 2022s, 4.5% 2024s and 6.875% 2025s, for which Uruguay is offering a purchase price of 114, 127.50, 106.00 and 119, respectively.
Those bonds were respectively trading on Friday at around 111.65, 127.25, 105.35 and 118.90, according to Thomson Reuters data. The new money component of the trade is expected to be anywhere between US$1bn-US$1.2bn.
Pre-funding and maintaining ample liquidity to cover at least 12 months of debt service have long been pillars of the country's debt management strategy. Continuación...