April 7, 2016 / 5:06 PM / 2 years ago

Cabei makes first dollar foray in Formosa market

NASSAU, April 7 (IFR) - Honduras-based Cabei raised US$185m from Taiwanese investors on Thursday with its first-ever dollar bond in the Formosa market, the development bank’s head of capital markets told IFR.

While the bank has tapped Taiwan accounts to issue in yuan in recent years, a dollar deal made more sense now amid worries about a currency devaluation by China, Ricardo Rico said.

By issuing a Formosa bond in US dollars, the bank is following in the footsteps of boldface US credits such as AT&T and Morgan Stanley.

“It is a huge market,” Rico said on the sidelines of the annual IDB meeting being held in the Bahamas. “You don’t see Latin American issuers going to the US-dollar Formosa market.”

Cabei, rated A1/A/A, was also able to extend its debt maturities beyond 10 years as insurance companies are the principal buyers of such deals.

The bank printed a US$25m 20-year non-call four bond at par to yield 4.40% and a US$25m 30-year non-call five at par to yield 4.55%.

It also sold a US$135m five-year floater that came at three-month Libor plus 50bp.

HSBC was sole lead on the transaction.

“The cost of funding is well below what we could obtain from a large 144A/Reg S US dollar,” Rico said.

Between the Formosa bonds and recent issues in the Swiss Franc market, Cabei has now raised US$400m of the US$1bn in external debt targeted for this year.

The remainder is expected to be raised in the Mexican peso market, where Cabei could issue up to US$300m equivalent as soon as July, and in the local currency market in the Dominican Republic for another US$50m.

The bank is also exploring options in Japan’s Uridashi and Samurai markets and could soon issue a bond denominated in a European currency apart from the euro.

Cabei is likely to return to the US dollar 144A/Reg S bond market with a sizable benchmark transaction at some point as its borrowing needs grow.

“It would make sense,” Rico said. “We are raising larger and larger sums.”

The bank hopes to be promoted to a Double A credit rating in the coming years, which would open up a new investor base that would include central banks. (Reporting by Paul Kilby; Editing by Marc Carnegie)

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