Embraer kicks off primary activity in soft day for LatAm credits

lunes 8 de junio de 2015 16:51 GYT

By Paul Kilby

NEW YORK, June 8 (IFR) - Brazilian airline manufacturer Embraer got the ball rolling in the LatAm primary markets on Monday with its largest ever bond -a US$1bn 10-year - despite a somewhat soft backdrop.

Heightened expectations of an imminent rate hike in the US following Friday's strong payrolls report created a somewhat risk-averse tone in LatAm on Monday.

But with US Treasuries finding support in a flight-to-safety bid on ongoing fears about the outcome to Greek debt negotiations, Embraer saw its opportunity to pull the trigger on a bond that had been expected as early as last week.

Playing it safe with what was seen as generous initial price thoughts of 300bp over US Treasuries, the borrower was quick to tighten and launch at 270bp after books peaked at US$3.5bn.

In the end, the company was able to upsize from an initial US$500m-US$750m target range and price a US$1bn 5.05% bond at 99.682 to yield 5.091%, the tight end of guidance of Treasuries plus 275bp area (+/-5bp).

Final pricing was seen coming some 15-20bp over the 250bp-255bp G spread being quoted on its 2023s, but after accounting for a 15bp curve extension, one banker saw Embraer leaving little or no new issue premium on the table.

This follows a mixed day in the secondary markets with Argentine debt falling up to half a point on Monday.

While some put the price movement down to news late Friday that US District Judge Thomas Griesa had ruled that Argentina must pay US$5.4bn to so called "me-too" investors, others thought investors were focusing largely on political risks ahead of the upcoming presidential elections in October.   Continuación...