NEW YORK, Sept 8 (IFR) - Brazilian beef company Minerva (BB-/BB-) reaped the benefits of an ongoing bid for EM assets on Thursday when it priced a US$1bn 10-year non-call five bond on the back of a US$3.5bn order book.
The bonds priced inside or flat to the company's outstanding curve at a final yield of 6.625% underscoring how much funding costs continue to shrink for EM credits.
Before the company announced a tender for its existing 7.75% 2023s in late August, those securities were being bid at 104.00 or at a yield to worst of 6.7%, according to a syndicate banker away from the deal.
"No matter how you cut it, it is a pretty aggressive print," he said. "It is coming inside where the 2023 was trading, and you could argue that it is 5/8 inside fair value."
Appetite for bonds from companies like Minerva has increased dramatically in recent months following the country's change to a more market friendly government and as investors lurched towards EM in their escape from negative rates at home.
The new bonds also fit the bill for investors who know and like the company, on expectations its ratings could get upgraded as it deleverages.
S&P revised its outlook on Minerva's BB- rating to positive in March, citing its strong liquidity and expectations that it would use free cash flows to reduce debt.
Net debt to last 12 months Ebitda stood at 2.7 times in the second quarter, versus 4.1 times in the fourth quarter last year, according to a roadshow presentation sent to investors.
"This is a high-quality, high-yield issuer well known to investors. It is not surprising they can print a US$1bn at 6.625% ... or that demand was robust despite any lack of real concession," said Jason Trujillo, a senior analyst at Invesco.
The positive reception to Latin America's first dollar trade since the Labor Day holiday bodes well for other Brazilian issuers lining up to come to market in coming weeks.
Brazilian food company BRF will start marketing a dollar bond next week as it looks to fund its own tender of outstanding 2020 and 2022 bonds, while logistics provider JSL has already kicked off roadshows.
"If Minerva proves successful, we will see more (Brazilian) trades coming to market in the next few weeks," said Klaus Spielkamp, head of fixed-income sales at Bulltick.
In the end, the bond priced at 99.096 with a 6.5% coupon to yield 6.625%, the tight end of guidance of 6.75% (+/- 12.5bp), and inside initial price thoughts of 7% area.
Banco Bradesco, Bank of America Merrill Lynch, HSBC, Itau and JP Morgan acted as leads. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)