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BRF to issue; Mexico's Alpek issues new bond

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    12 September 2019
    Published by

    Following the tender offer mentioned in our previous note, BRF, S.A. (BRFSBZ) is expected to come to the market with a Senior Unsecured bond with "intermediate maturity" which we believe could be a 10-year, expected to be rated Ba2/NR/BB whose proceeds will be used, as per the Tender above, to redeem:

    1. Its BFF International Ltd., US$86.1mn (out of an original outstanding amount of US$750mn), 7.25%, Senior Unsecured bonds (Ba2/BB-/BB), due 2020 that are currently trading at around US$102.205 (ALLQ) to yield approximately 1.33% (to Worst) for a negative G-Spread of -58 bps and a negative Z-Spread of -79 bps;

    2. Tender its BRF, S.A., US$118.662mn (out of an original issue amount of US$750mn), 5.875%, Senior Unsecured bonds due 2022 (Ba2/BB-/BB), currently trading at around US$104.571 (ALLQ) to yield approximately 4.09% (to Worst) for a G-Spread of 247 bps and a Z-Spread of 249 bps; 

    3. Tender its BRF, S.A., US$500mn, 2.75%, Senior Unsecured bonds (Ba2/BB-/BB) due 2022, currently trading at around US$104.72 (ALLQ) to yield approximately 0.98% (to Worst) for a G-Spread of 187 bps and a Z-Spread of 149 bps;

    4. Tender its BRF, S.A., US$500mn, 3.95%, Senior Unsecured bonds (Ba2/BB-/BB) due 2023, currently trading at around US$101.283 (ALLQ) to yield approximately 3.87% (to Worst) for a G-Spread of 227 bps and a Z-Spread of 232 bps; and 

    5. Tender its BRF, S.A., US$750mn, 4.75%, Senior Unsecured bonds (Ba2/BB-/BB) due 2024, currently trading at around US$104.36 (ALLQ) to yield approximately 3.72% (to Worst) for a G-Spread of 214 bps and a Z-Spread of 220 bps.

    We believe that the company could issue cUS$1.0bn in what we expect will be 10-year bonds, that in our view should price at 5.0-5.25% given that its currently outstanding BRF GmbH US$500mn, 4.35% Senior Unsecured bonds due 2026 are currently trading at cUS$99.522 (ALLQ) to yield c4.43% (to Worst) for a G-Spread of 276 bps and a Z-Spread of 288 bps. These bonds have a duration of around 6.021 years.

    We have a Hold recommendation on the BRF family of bonds as these are the most expensive among the whole Brazilian animal protein and foods sector universe of credits.

    Alpek's new bond

    On a separate note, Mexico's Alpek, S.A.B. de C.V. (ALPEKA) yesterday (11 September) issued its US$500 million, 10-year bond at T + 255 bps. The bond is, as expected, Senior Unsecured and was rated Baa3/BBB-/BBB-. The coupon was 4.25% and the re-offer price was US$99.718. In our report of 5 September, we stated that we believed that the "intermediate maturity" could be 10-years, which has now been confirmed. We also said that we expected the new bonds to price at around the mid 5.0%'s level.