NEW YORK, Nov 3 (IFR) - LatAm primary markets enjoyed a rare surge in activity on Tuesday when regional development banks CAF and Mexican REIT Terrafina tapped the bond markets to raise a combined US$1.5bn.
Terrafina, rated Baa3/BBB-, finally emerged from the pipeline after a two-month wait, selling a US$425m 5.25% seven-year bond at 99.486 to yield 5.339% or Treasuries plus 337.5bp, which was tight to initial price thoughts of 350bp.
The final spread was seen providing a decent pick-up to Terrafina's principal comparable, another Mexican REIT called Fibra Uno, which had also held off from selling bonds following the completion of roadshows in September.
With Fibra Uno's 2024s (Baa2/BBB) trading with a G-spread of around 265bp, bankers calculated that the higher-rated REIT could print a new seven-year at anywhere between 265bp-275bp and that fair value on Terrafina would be around 300bp.
The final spread of 337.5bp was wider than the typical 20-45bp spread differential seen in the US between specialized REITs like Terrafina and those with more diversified portfolios such as Fibra Uno, noted a DCM banker away from the deal.
The relatively high premium and talk of book that reached just two times disappointed some bankers who had hoped for a more spectacular finish in what was the first true LatAm corporate issue in three months.
"We would have liked to have seen a trade to come with more support," said a banker away from the deal. "We'll be watching to see how it performs on the break tomorrow.
Others thought Terrafina's results were fair given its debut status and weaker credit standing against the larger and more diversified Fibra Uno.
A supportive backdrop in recent days has had issuers taking a second look at the market, including Terrafina who may have wanted to pull the trigger before Friday's payroll number and any possible volatility over the timing of rate hikes in the US.
Meanwhile, CAF returned to the euro markets with a new EUR750m 1% five-year that was priced at 99.903 to yield 1.020% or mid-swaps plus 73bp, some 10bp tight to initial price thoughts of plus 80bp-85bp.
The regional development bank, which is rated Aa3/AA-/AA-, has been positioning itself, as a supranational credit. This trade attracted a good number of investors who buy the likes of KfW, as well as asset managers and insurance companies.
Chilean financial institution Tanner kicked off fixed-income investor meetings as it looks to market a possible 144A/Reg S bond sale through Bank of America Merrill Lynch and JP Morgan.
Roadshows finish on November 4. Expected ratings are BBB- by S&P and Fitch. The company is considering a US$300m five-year senior bond, according to Fitch.
Mexican white-goods manufacturer Controladora Mabe has finished investor meetings through Barclays, Bank of America Merrill Lynch, Citigroup and JP Morgan. Ratings are BB+/BB+.
Mexican REIT Fibra Uno completed meetings with investors through Bank of America, Credit Suisse, HSBC and Santander.
Brazilian airline GOL Linhas Aereas Inteligentes (B3/B-/B-) completed roadshows with Morgan Stanley, Credit Suisse and Citigroup. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)