LIMA, Oct 13 (IFR) - CABEI is likely to seek longer bond tenors in a variety of currencies to cover some US$1bn in funding needs next year, said the Honduras-based bank’s head of capital markets.
This follows a year in which the Central American development bank sacrificed duration for better pricing in what has been a tough year for emerging-market issuers.
After swapping back to floating-rate dollars, the bank has so far this year enjoyed average funding costs of around 62bp over Libor.
That is considerably tighter than the 92bp it achieved in 2014, Ricardo Rico, CABEI’s head of capital markets, told IFR on the sidelines of the IMF meetings in Peru.
“It is very difficult for a single A credit to get (all-in) cost of funding at 60bp over Libor, at least during the current year” said Rico.
“Single A curves for banks in the US are closer to 90bp.”
Average duration on its bonds for 2015, however, was just 4.4 years versus 9 years in 2014.
CABEI is now considering private placements to cover the remaining US$143m it needs to raise this year, and these could extend 2015 duration through longer tenors, Rico said.
“Next year we are going to aim for longer tenors. And (as a result) I am sure cost of funding for 2016 will not be as aggressive.”
In 2015, the borrower debuted in the Japanese retail-focused Uridashi markets and in Peruvian soles, while also returning to the Mexican peso market and selling more Renminbi bonds to Taiwanese investors.
CABEI was able to swap back proceeds to floating-rate dollars at very competitive rates, often at anywhere between 30bp-40bp over Libor, though tenors were relatively short at between three to four years.
Meanwhile the bank continues to keep a close eye on a possible Samurai issue as well as an inaugural offering in Australian dollar market.
Daiwa and Mizuho took CABEI on a Japanese road show in July and the borrower is only waiting for costs to improve in the FX swap market before moving forward with a Samurai bond - its first in nearly a decade, said Rico.
It is a similar story in Australia, where CABEI has yet to use its debt shelf. “Australian investors have been risk averse and they have been looking at AAA (credits),” he said. (Reporting by Paul Kilby; Editing by Marc Carnegie)