Flash Fixed Income Report /

Bancolombia's new subordinated issue; attractive

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    10 December 2019
    Published byTellimer Research

    Bancolombia S.A. (BCOLO) is expected to come to the bond market today with a junior tier 2 subordinated 10-year bond (non-call 5). The bond will be junior to all senior external liabilities, pari passu to all Tier 2 capital subordinated indebtedness and senior to subordinated Tier 1 capital instruments and capital stock. 

    The expected ratings for the issue are Ba3/NR/BB+, and the bank's ratings are Baa2/NR/BBB.

    The bank currently has a US$750mn junior subordinated 4.875% bond due 2027 that is priced at cUS$102.286 (ALLQ) to yield c4.02% (g-spread 239bps; i-spread 239bps). The new US$500mn issue has initial price guidance of "high 4% to 5%", which we believe is attractive if the final price is in this range.

    The proceeds from the issue are expected to be used to refinance up to US$750mn of: 1) the outstanding US$259.088mn (of an originally issued amount of US$620mn) 6.125% subordinated bonds due 2020, which trade at cUS$102.849 (ALLQ) to yield c1.50% (to worst); and 2) the US$1.103bn (of an originally issued amount of US$1.424bn) 5.125% subordinated bonds due 2022, which trade at cUS$105.898 (ALLQ) to yield c2.88% (to worst).

    The new issue is expected to price today.