NEW YORK, Oct 19 (IFR) - Uruguay broke a two-week lull in the LatAm primary market on Monday when it announced an up to US$1.7bn sale of new 2027s to retire off-the-run bonds.
The deal comes amid an unsteady backdrop for emerging markets after data showed that Chinese growth dipped below 7% for the first time since the financial crisis.
“The tone has been better ex-Brazil, but this is still really a market for sovereigns and quasi sovereigns (only),” said a senior banker away from the deal.
Playing it safe, leads initially offered a generous new issue premium of 45bp-55bp on initial price thoughts of 265bp over Treasuries. This level was tightened at guidance to 250bp (plus/minus 5bp) with books heard hitting around US$2.3bn.
“We think fair value is 240bp area,” said a syndicate banker away from the deal. “Anything past that would be surprising.”
The deal is being done in conjunction with a one-day cash tender for outstanding 9.25% 2017s, 8% 2022s, 4.5% 2024s and 6.875% 2025s, for which Uruguay is offering a purchase price of 114, 127.50, 106.00 and 119, respectively.
Those bonds were respectively trading on Friday at around 111.65, 127.25, 105.35 and 118.90, according to Thomson Reuters data. The new money component of the trade is expected to be anywhere between US$1bn-US$1.2bn.
Pre-funding and maintaining ample liquidity to cover at least 12 months of debt service have long been pillars of the country’s debt management strategy.
The government currently holds around US$2.5bn in liquid assets, in addition to US$2bn of contingent credit lines from multilateral institutions.
Uruguay does face headwinds, however. While the country may have benefited from lower oil prices, it is suffering from slowing economic growth, high inflation and rising debt levels.
The country’s debt burden will jump to 52.1% of GDP this year, up from 47.7% in 2014 mostly thanks to a primary deficit, FX depreciations and funding to cancel debt with Venezuela PDVSA, Fitch said in a recent report.
The amortizing bond, which has an average life of around 11 years, is being led by Citigroup, HSBC and Itau.
The South American country, which is rated Baa2/BBB/BBB-, is expected to price the deal today.
Peru (A3/BBB+/BBB+) has appointed BBVA, BNP Paribas and JP Morgan to arrange fixed income investor meetings in Europe from October 20 to update on the country’s financing program and discuss developments in the economy. A potential transaction may follow.
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 real-estate investment trust Fibra Uno has completed meetings with investors through Bank of America, Credit Suisse, HSBC and Santander.
Terrafina, another Mexican REIT, has finished meeting accounts as it markets a potential US$400m-$500m bond offering. The borrower mandated Barclays and Citigroup as lead managers, with Itau coming in as co-manager. Expected ratings are Baa3/BBB-.
Brazilian airline GOL Linhas Aereas Inteligentes (B3/B-/B-) has completed roadshow with Morgan Stanley, Credit Suisse and Citigroup. A financing deal may follow, subject to market conditions. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)