Flash Fixed Income Report /

Brazil: Itau Unibanco's new two-tranche issue

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    16 January 2020
    Published byTellimer Research

    Brazil's Itau Unibanco, one of the country's two largest financial institutions, is expected to come to the market with a two-tranche issue, likely to be printed through Itau Unibanco Holdings (ITAU).

    Tranche A is expected to be "benchmark size", three-year, senior unsecured bonds due 24 January 2023 (Ba3/BB-/BB); initial price guidance has been set in the 3.2% area. The bank has US$1.87bn 5.125% subordinated bonds (Ba3/NR/B+) due 2023, which trade at cUS$106.806 (ALLQ) to yield c2.95% (g-spread 137bps; z-spread 134bps). Given the senior characteristic of the senior unsecured new bonds relative to the currently outstanding subordinated 2023s, we believe the price guidance is too generous; final pricing should be tighter than where the subordinated bonds currently trade. We believe this tranche could price at c2.9%.

    Tranche B is also expected to be "benchmark size" bonds, this time five-year senior unsecured bonds due 24 January 2025 (Ba3/BB-/BB); initial price guidance is in the 3.5% area. The closest reference in terms of maturity is the subordinated issue mentioned above. Based on its trading levels, we believe the new 2025s could price at c3.25%.

    Pricing is expected today.