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Colombia: Credivalores new issue could price tight

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    3 February 2020
    Published byTellimer Research

    Colombia's Credivalores-Crediservicios, S.A. (CREDVA) is expected to come to the bond market today with a US$300mn senior unsecured issue, 5-year maturity (Non-Call 3) and expected B/B+ rating. The proceeds will be used to: pay the consideration for the tender offer; pay accrued and unpaid interest on the currently outstanding 2022 senior unsecured bonds (described below); pay fees and expenses; repay certain indebtedness; and, the remainder for general corporate purposes. We do not discount the possibility of CREDVA increasing its new issue size between US$325mn-350mn, if the order book is strong enough and the company considers it pertinent to build a "war chest" with the upcoming bonds.

    CREDVA is a Colombian non-bank financial institution (NBFI) that has been around for more than 15 years, with 92 offices and Points of Contact (POC) throughout the country, and more than 1,900 direct and indirect agents. It provides credit cards, micro lending and corporate loans. CREDVA has a US$325.0, 9.75%, senior unsecured bond outstanding, currently seen trading at cUS$106.144 (ALLQ) to yield c6.67% (g-spread 514bps; z-spread 501bps), but a duration of only 0.478 years. 

    With the initial price guidance "in the low 9.0%", we see the new bonds as tight if they come in at, or even below, 9.0%. Compared with Mexican NBFI Alpha Holdings' (ALPHSA) recent issue of US$400.0mn, 9.0% senior unsecured bonds due 2025 (rated B+ by S&P), which is one-notch higher in rating and operates in a much larger market, we believe that CREDVA's fair price should be at a discount to ALPHSA by 25-50bps.

    We would therefore consider CREDVA as attractive at a level between 9.25-9.50%, but given the robust books generated by ALPHSA (close to US$1.0bn) and the absence of high-yield credits being issued at the higher-end of single-digit returns, we assume that CREDVA will be able to print at 9.0% flat.

    Pricing is expected today, but it won't be a surprise if the launch is postponed by a few days, given that the markets could be down from the coronavirus contagion, making conditions to issue less than optimal.