NEW YORK, March 18 (IFR) - Bonds issued by Chile’s Entel were holding recent highs on Friday after rallying in the wake of the telco’s announcement that it intends to raise about US$520m through a share sale.
The company’s 2026s were trading at 94.00-95.00 on Friday, a four point jump from Thursday morning levels, while the 2024s had advanced two points to 96.50-97.75.
“The bond spreads are compressing and there is more room to run,” a New York-based trader told IFR.
News of the capital raise brought praise from the rating agencies and relieved some pressure on the company’s weakening credit standing.
Moody‘s, which downgraded Entel to Baa3 with a negative outlook last month, said the stock sale was credit positive, assuming proceeds would go to fund its aggressive spending program rather than debt.
Markets had been fretting about Entel’s less-than-successful expansion into the Peruvian market and subsequent deterioration in its leverage metrics as it headed toward junk territory.
“They made a big play in Peru and they failed miserably,” the trader said.
A debt-driven capital investment expansion in Peru raised leverage to 3.8x by the end of 2015, up from 3.4x in 2014 and 2.0x in 2013, according to Moody‘s.
“The capital increase will allow the company to achieve its long-term target leverage of a net debt to Ebitda ratio of less than 2.0x sooner than it would have otherwise, but not before 2019,” said the rating agency. (Reporting by Paul Kilby; Editing by Marc Carnegie)