Flash Fixed Income Report /

Brazil's CSN Resources' new tender offer

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    17 January 2020
    Published byTellimer Research

    Brazil's steel and mining giant Companhia Siderurgica Nacional or CSN (CSNABZ) has announced that it will initiate a tender offer for any and all of its subsidiary CSN Resources S.A.'s US$433.603mn (originally issued US$1.2bn) 6.5% senior unsecured bonds due 21 July 2020 (B2/B/B), at a purchase price of US$102.00 (or US$1,020.00 per US$1,000 of principal).

    We rate the CSNABZ family of bonds a Hold.

    The bonds currently trade at cUS$102.101 (ALLQ), slightly up from the recent level of cUS$101.9, on the back of the news. Therefore, there is basically no difference between selling the bonds in the open market and tendering the securities. However, we believe that it is usually a good idea to accept the tender instead. The tender will also include the accrued interest up to, but excluding, the settlement date.

    According to the company's release, the main characteristics of the tender offer, aside from the tender price consideration stated above, are:

    "The Tender Offer is scheduled to expire at 5:00 p.m., New York City time, on 24 January, 2020, unless extended or earlier terminated as described herein (such time, as may be extended, the "Expiration Time"). Holders of Notes who validly tender (and do not validly withdraw) their Notes or deliver a properly completed and duly executed notice of guaranteed delivery (the "Notice of Guaranteed Delivery") at or prior to the Expiration Time will be eligible to receive US$1,020.00 for each US$1,000.00 principal amount of Notes validly tendered and accepted for purchase, plus Accrued Interest. Validly tendered Notes may be validly withdrawn at any time at or prior to the Expiration Time, unless extended or earlier terminated as described below, but not thereafter.

     In addition to the purchase price, all holders of Notes accepted for purchase pursuant to the Tender Offer will receive Accrued Interest.

    CSN Resources' obligation to purchase Notes validly tendered pursuant to the Tender Offer is subject to market conditions and the satisfaction or waiver of certain conditions described in the Offer to Purchase, including completion by CSN, through one or more finance subsidiaries, of new debt financing on satisfactory terms and conditions. However, the Tender Offer is not conditioned on any minimum amount of Notes being tendered."

    The above suggests CSNABZ will most likely be issuing new debt to fund the tender offer, and indeed, the company has already scheduled a series of investor meetings in the US and Europe, starting 20 January 2020, to that effect. The company will be looking to issue new senior unsecured bond with "intermediate maturity" although, at this early point in time, no information on the size of the issue (which we believe could be US$500mn) or initial price guidance has been given.