Embraer offering generous premium on new 10-year bond

lunes 8 de junio de 2015 11:39 GYT

By Paul Kilby

NEW YORK, June 8 (IFR) - Brazilian aircraft manufacturer Embraer is out with a new 10-year bond on Monday and is enticing investors with initial price thoughts that seem to carry a hefty new issue premium.

Embraer pulled the trigger on the bond today after holding back last week following roadshows in a week that saw considerable rate volatility in the US. Roadshows for the trade ended on June 2.

Keen to get its deal done this time around, the issuer is adopting a defensive pricing approach of offering a big premium initially then probably use a building book to tighten levels.

At initial price thoughts of Treasuries plus 300bp, Embraer (rated Baa3/BBB) is offering a 50bp pick-up to the 250bp G-spread on its outstanding 5.696% 2023s.

Against the 2022s, which are trading at a G-spread of 216bp, that premium looks even more alluring.

The 2023s are particularly illiquid and tend to trade wider than they perhaps should. That's partly because the securities were issued as a result of an exchange and were thus distributed among a handful of existing holders, said a DCM banker.

Even after adding another 30bp for a curve extension and new issue premium, the issuer has a fair amount of room to squeeze pricing from here, said a second banker away from the deal.

Other Brazilian Triple B names such as food company BRF (Baa3/BBB/BBB-) and pulp paper producer Fibria (Ba1/BBB-/BBB-) are trading at tighter levels.   Continuación...