Rede D'Or's (RDEDOR) new bond is the first one coming out of Brazil this year. The healthcare company is expected to come to the market with a USD-denominated, 10-year bond (BB-/BB), with a benchmark size that we believe could be between US$500.0mn-1.9bn, and initial price talk in the 4.875% area.
Rede D'Or provides medical and surgical hospital services with operations in Rio de Janeiro, São Paulo, Distrito Federal, Pernambuco, Maranhão and Bahia. The company has one USD-denominated bond – a US$500.0mn, 4.95% bond due 2028 (BB-/BB) that is currently seen trading at cUS$104.986 (ALLQ) to yield c4.19% (g-spread 241bps; z-spread 248bps). Considering these levels, we believe that the new bond will price tighter to the guidance and could print at around 4.5% to 4.75%, since the duration of the outstanding bond is only 6.416 years.
Rede D'Or's new bond is also one of only two high-yield bonds that have come to the bond market so far in 2020 – the other being Colombia's Termocandelaria rated BB/BB+. This 10-year bond priced to yield 5.898%, making the new Rede D'Or look expensive.
However, due to the low number of high-yield new issues coming out of LatAm, and the positive outlook for Brazil, we expect strong demand, which leads us to think that the bond will price below guidance. We expect pricing today.