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Chile: Embotelladora Andina to issue new bond

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

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    Tellimer Research
    15 January 2020
    Published byTellimer Research

    Chile-based Embotelladora Andina, S.A. (ANDINA) is expected to come to the bond market with a US$300.0mn, 30-year senior unsecured bond rated BBB/BBB+. The initial price guidance is T + low 200bps. 

    The company's flagship products are Coca-Cola beverages, but it also produces and distributes beer in Brazil, fruit juices and mineral water in Chile, and ready-to-drink "Hi-C" juices in Argentina. ANDINA also makes PET plastic bottles through a packaging subsidiary (Edasa) and manages vending machines through its Servicios Multivending subsidiary. The Coca-Cola Company owns c15% of ANDINA.

    ANDINA currently has one USD-denominated bond – its US$365.0mn (out of an originally-issued amount of US$575.0mn), 5.0% senior unsecured bond due 2023 (BBB/BBB+). The bond is seen trading at cUS$107.979 (ALLQ) to yield c2.72% (to worst) for a g-spread of 114bps and z-spread of 111bps. The duration is 3.396 years.

    Given the recent price performance after guidance of high-grade Chilean issuers, we believe that the final pricing will tighten between T + 150bps to T + 175bps.

    The LatAm primary market has been on fire recently and new issues have priced quite tight for the most part. For instance, yesterday's new US$850.0mn (up-sized from an originally-planned amount of US$750.0mn) Rede D'Or 2030 Brazilian issue, rated BB-, came out with a 4.5% coupon and is now currently seen trading at cUS$100.304 (ALLQ) to yield 4.46% (g-spread 267bps; z-spread 272bps). Compare this to the higher-rated Braskem's US$1.50bn, 4.50% senior unsecured bond rated BBB-/BBB- that is currently seen trading at cUS$100.301 (ALLQ) to yield c4.46% (g-spread 265bps; z-spread 270bps). These are two different bonds with different ratings, but trading at the same yield, which confirms to us that the new issues are pricing well below where they should objectively be printing. 

    Due to this mostly technical factor generating extremely strong demand for new paper (whether high-grade or high-yield, and from practically any LatAm country), we see ANDINA coming out well below price guidance and tight, as has been the case with most new recent issues. We expect pricing today.