Flash Fixed Income Report /

Chile: Geopark's new issue is first high-yield corporate bond this year

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    14 January 2020
    Published byTellimer Research

    Geopark Limited (GEOPAR) is expected to come to the market as the first high-yield corporate (B+/B+) bond coming out of Chile this year. Geopark is an oil and gas exploration and production company with operations in Chile, Colombia, Brazil, and Argentina.

    The company is expected to issue US$350.0mn in 7-year bonds (due 17 January 2027) guaranteed by Geopark Chile SpA and Geopark Colombia S.L.U., in order to finance the purchase payable in connection with the Amerisur acquisition as well as for general corporate purposes, including capital expenditures. The initial price guidance for the new bond is in the 6.0% area. 

    The company currently has an outstanding US$400.0mn senior secured bond (1st Lien) rated B+/B+, currently seen trading at cUS$106.523 (ALLQ) to yield c4.31% (g-spread 275bps; z-spread 266bps) with a duration of 1.593 years. Given this reference, we believe it is likely that the new bond could price closer to the 5.75% level, although we do not have information on whether the new issue will be senior secured or unsecured. If it is unsecured, it could leave the final pricing closer to initial price guidance.

    We expect the bond pricing today. We expect strong demand given the absence of new high-yield bonds coming out of Chile, and the positive dynamics so far of the oil and gas sector (despite the company's operations in Argentina, which we believe is a factor for the relatively high coupon set forth in the price guidance).