ENAP amasses US$3.5bn book as investors shrug off poor metrics
By Paul Kilby
NEW YORK, Aug 2 (IFR) - Sovereign support overshadowed poor credit metrics as investors snapped up Empresa Nacional de Petroleo's US$700m 10-year bond on Tuesday - the Chilean issuer's first international market foray since 2014.
Starting with initial price thoughts of high 200s, the state-owned oil company, better known as ENAP, was able to tighten spreads by around 50bp before launching at Treasuries plus 240bp, the tight end of guidance of 250bp (+/-10bp).
Implicit government support for the 100% state-owned entity made it a buy for many accounts despite the company's high leverage ratios.
Fitch said on Tuesday that while ENAP's debt to Ebitda stood at 5.2x over the last 12 months ending March 2016, strong government involvement was a key driver for its expected single A rating on the deal.
"It is a 100% owned by the sovereign, but when you look at the credit it isn't investment grade and you are not getting paid for that," a US-based investor said.
Yet while some investors thought they could be better compensated elsewhere for taking on oil sector risks, others focused squarely on the spread differential to the Chilean sovereign curve.
At a final launch spread of T+240bp, ENAP's bonds (rated Baa3/BBB-/A) came some 150bp over Chile (rated Aa3/AA-/A+), whose new 2026s have been trading with a G-spread of close to 90bp.
Against its own curve, however, such levels looked tight after accounting for an extension from the existing 2024s, which were trading with a G-spread of 230bp. Continuación...