23 de octubre de 2014 / 13:28 / en 3 años

UPDATE 2-Peru investor meetings leave market hanging

(Adds market reaction, debt official quotes, background)

By Davide Scigliuzzo

NEW YORK, Oct 23 (IFR) - Peru’s announcement of a fresh round of investor meetings has set off speculation that the sovereign may be plotting a return to the international capital markets after a two-year absence.

The country, rated A3/BBB+/BBB+, has hired Bank of America Merrill Lynch, BBVA and Morgan Stanley to arrange meetings in the US and Europe, according to sources close to the situation.

While one source stressed the roadshow is not related to a new bond issue, market participants said several options could be on the table.

“It could be just informational or it could be a new deal or some kind of liability management,” said one US-based investor scheduled to meet with the sovereign.

Peru has shied away from dollar transactions over the last couple of years, as it focuses on the development of local capital markets through domestic issues in soles.

“We have been consistent in what we have defined as one of our main goals, in terms of de-dollarizing our debt portfolio up to a certain level,” Carlos Linares Penaloza, Peru’s general director for public debt and treasury, said this month.

“Of course this doesn’t limit us if we see the need or the opportunity to go to the international market,” he said. “We are going to be open.”

Given Peru’s limited external financing needs, a new issue could be related to the retirement of old bonds, which generally carry high coupons and trade at elevated cash prices.

A banker not involved in the meetings said the sovereign’s curve would benefit greatly from such a liability management transaction.

“Peru’s debt trades wider than it should because of the high dollar prices,” said the banker, who mentioned the 7.125% 2019s, 7.35% 2025s and 5.625% 2050s as the most obvious maturities to target.

“It hurts them. They should do a liability management on all of those.”

The bonds are trading at cash prices of anywhere between 113 and 133, and holders might welcome the opportunity to swap them for an instrument sold closer to par and with a greater appreciation potential in the secondary market.

Peru itself would be likely to benefit from its rarity value in the international markets, as well as from an ongoing bid for high-quality sovereigns.

A new 10-year issue, for example, could allow the country to roughly halve the coupon it pays on its 2025s, bringing it from 7.35% to closer to 3.6%, which is were the notes currently trade on a yield basis, say bankers.

In an interview with IFR on the sidelines of the annual meetings of the International Monetary Fund in Washington this month, Linares said the country could consider replacing old bonds with high coupons for newly issued securities, but that such a transaction would not be a priority.

Peru needs to raise around 4.5bn soles (US$1.5bn) in the capital markets in 2015, up slightly from around 3.5bn soles this year. It has already started to meet its 2015 requirement through local auctions.

In June, the sovereign updated a debt shelf with the SEC worth up to US$4.5bn, a routine step before the country can issue internationally.

The investor meetings will take place in San Francisco on October 27, Los Angeles and London on October 28, and Boston and New York on October 29.

Peru was last in the international markets in early 2012, when it raised US$1.1bn equivalent through a tap of its US dollar-denominated 2050s and sol-denominated 2031s. (Reporting by Davide Scigliuzzo; Editing by Helene Durand, Shankar Ramakrishnan and Paul Kilby)

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