NEW YORK, June 2 (IFR) - The Province of Buenos Aires, rated Caa2/CCC-, rode a wave of strong demand for Latin American credits on Tuesday to print its long-delayed bond issue and address looming refinancing risks.
The Province enjoyed over US$2bn in demand on a US$500m six-year bond as investors took a liking to the double-digit yields and any potential upside from a change of government come the elections in October.
The offering also arrived on a positive day for Latin American credits, whose prices were holding firm despite US Treasuries selling off Tuesday amid expectations of improving jobs data on Friday.
“People are suddenly seeing value in LatAm compared to the US high-grade space, where there has been a ton of supply,” said a syndicate official.
In the end, the Argentine issuer priced the deal at 98.764 with a 9.95% coupon to yield 10.25%, the tight end of 10.25%-10.35% guidance and inside initial price talk of mid 10% area.
At the final yield, the amortizing bond with a 5.5 year average life was seen coming inside its own curve, where its existing 2021s had been trading at 10.35%.
“It came through its curve, which is not surprising,” said the syndicate official. “People are looking at headline yield. It is hard finding any asset class that will pay that much and there is a lot of upside down the road.”
In an effort to address upcoming maturities, the Province of Buenos Aires will also offer investors the opportunity to exchange up to US$500m of its outstanding 11.75% 2015 for additional amount of the new bonds.
The Province of Buenos Aires came on a solid day for Latin American credits, especially Brazil where credits were enjoying the spillover effects from Petrobras successful reentry into the markets Monday.
Prices on Petrobras’s new 6.85% 100-year were holding up in the face of the US Treasury weakness to trade at 82.10-82.50, with spreads tightening about 23bp to 528bp-525bp. The bond priced yesterday at 81.07 to yield 8.45% or US Treasuries plus 549.3bp.
“There are a lot of buyers,” said trader focused on Brazilian debt. “There is a little concern about rate hikes in the US.” PIPELINE
Lima Metro Line 2 Finance Limited, a company established by a consortium of Peruvian and European sponsors, has selected banks to take it on global roadshow ahead of a potential 144A/RegS USD bond sale of US$1.14bn of senior secured notes.
The issuer will meet accounts in New York on June 3, in Boston and London on June 4, in Los Angeles and London on June 5, leaving June 8 free for investor calls. Citigroup, Morgan Stanley and Santander have been mandated as global coordinators for a potential senior secured bond, which is expected to be rated Baa1/BBB/BBB.
LatAm Airlines is marketing a potential senior unsecured bond offering. The company will wrap up marketing Wednesday.
Ratings are Ba2/BB/BB- by Moody‘s, S&P and Fitch. The deal is being done in conjunction with a tender offer and consent solicitation for US$300m in outstanding 9.50% 2020s issued by TAM.
Citigroup and JP Morgan are acting as global coordinators as well as joint bookrunners along with Bank of America Merrill Lynch, BTG Pactual, Credit Agricole and Santander.
Mexico’s Comision Federal de Electricidad (CFE) has selected BBVA, Bank of America Merrill Lynch, Citigroup, Goldman Sachs, HSBC, Morgan Stanley and Scotiabank to organize the fixed-income investor meetings.
The borrower, rated Baa1/BBB+/BBB+, will finish marketing in New York on Wednesday.
Brazilian aircraft manufacturer Embraer, rated Baa3/BBB, has mandated Citigroup and Morgan Stanley to meet fixed-income investors ahead of a potential SEC registered bond offering. The company finished marketing in New York Tuesday. (Reporting By Paul Kilby)