Flash Fixed Income Report /

Chilean issues surprisingly dominate LatAm primary market

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    7 January 2020
    Published byTellimer Research

    Who would have thought issues from Chile will dominate the LatAm primary market at the start of 2020. Despite the political turmoil and continued uncertainty over the country's new constitution, Chilean corporates are lining up to print new bonds, at what we believe are attractive yields, given the ratings (both the sovereign and each of the issuing corporate) and because the issuers' credit quality and business prospects appear to be intact.

    Yesterday, Banco del Estado de Chile (BANCO) issued a US$750.0mn, 2.70% senior unsecured bond due 2025 (A1/A+) at par to yield T+110bps.

    Today, Corporacion Nacional del Cobre CODELCO (CDEL) announced plans to issue a dual-tranche bond consisting of: Tranche A, a 10-year "benchmark-sized" bond (which, in the case of CODELCO, seldom means less than US$1.0bn) with an initial price guidance of T+150bps; Tranche B, a tap of its US$900.0mn, 3.70% senior unsecured bonds due 2050 (A3/A+/A-), which are currently trading at cUS$97.907 (ALLQ) to yield c3.81% (g-spread 154bps; z-spread 190bps). The initial price guidance for the "benchmark-sized" tap (which, given the size of the currently outstanding bonds, we believe could be cUS$500.0mn in additional bonds) is T+180bps. 

    Also today, Banco Santander Chile (BSANCI) is planning a 5-year US$-denominated bond(the bank does not have any bond in US$ with this maturity) with an initial price guidance of T+130bps. Its comparable bond would be the bank's US$331.147mn (out of an originally issued amount of US$750.0mn), 3.875% senior unsecured bonds due 2022 (A1/A/A), currently trading at cUS$103.743 (ALLQ) to yield c2.43% (g-spread 88bps; z-spread 85bps). At the initial price guidance level, we believe these bonds are extremely attractive.

    Finally, Empresas CMPC, S.A., one of Chile's main manufacturers of wood and forest products (including pulp, graphic paper, cardboard, tissue paper, newsprint and packaging materials), is on the road marketing a potential "benchmark", senior unsecured bond with intermediate maturity (which we believe could be between 7 and 10 years) that could be issued by its wholly-owned subsidiary Inversiones CMPC, S.A. (CMPCCI). We believe a good bond to look at to get an idea of the potential tenor, size and price of the new bond, is the company's currently outstanding US$500.0mn, 4.375% senior unsecured bond due 2027 (Baa3/BBB-/BBB) that is currently trading at cUS$106.034 (ALLQ) to yield c3.42% (g-spread 170bps; z-spread 177bps).

    With all these issues about to print or already in the market, we believe it is safe to say that investors are still confident on Chile and on the credit worthiness of at least the country's stronger companies.