(Adds concession, banker comments)
By Paul Kilby
NEW YORK, April 28 (IFR) - Guatemala returned to the international bond markets on Thursday with a US$700m 10-year bond, marking its first crossborder debt sale in three years.
With initial price thoughts set at 4.875% area, the deal is seen coming with a concession of about 3/8s over fair value for a new 10-year bond from Guatemala, which bankers calculate to be around 4.50%.
Guatemala has two outstanding dollar bonds - the 5.70% 2022s and the 4.875% 2028s, which have been trading at 3.90%-3.80% and 4.65-4.60%, respectively. But market participants are largely leaning on the latter as the main comparable.
“Maybe they will end up at 4.625%, which would be flat to the 2028s,” said a DCM banker.
While the deal offers some pick-up to the 4.15% being quoted on the higher rated Colombia 2026s (Baa2/BBB/BBB), it is coming tight to the 4.80%-4.85% yield spotted on the similarly rated 2026s issued by Paraguay(Ba1/BB/BB).
Such comparisons may matter little for Guatemala’s deal, which enjoys some rarity value, a decent regional bid from local investors and qualifies for inclusion on key debt indices.
“Central American sovereigns trade technically tight,” said a syndicate manager. “They isn’t a lot of supply and they are index eligible so people have to buy it.”
The Central American country has capped the size at US$700m and will use proceeds to pay down debt and to finance investment programs as well as capital expenditures.
The senior unsecured bond is expected to be rated Ba1/BB/BB and is being led by sole bookrunner Bank of America Merrill Lynch.
The Central American country last tapped the international bond markets in February 2013, when it raised US$700m through a rare 15-year bond that priced at a yield of 5%. (Reporting By Paul Kilby; Editing by Jack Doran)