Latin American corporate issuers have also been taking advantage of what seems to be a limitless appetite for new debt. The year started with a bang, with high-grade corporates from Chile, but apparently seeing the extremely strong demand in the markets, more issuers followed both from other countries, and also along the different ratings scale. In this case as well (as has been the case for sovereign issuers) most companies have seen very robust order books that have resulted in most of them printing below their respective Initial Guidelines. Further, the pipeline for new issues seems to continue to be full and we see no signs of this subsiding any time soon. Our worry continues to be that technicals (and the need to find a place where to put funds' cash to work) might continue to prevail over relative value. The tight levels at which most issuers are being able to print might widen if the market gets saturated or if fundamentals become again (as we think they should) the main basis for making a wise investment decision. For now, the wave continues though, as shown by the following transactions:
Yesterday, Brazil's Banco Bradesco (BRADES) issued its Two-Tranche bonds as follows:
Tranche A: US$800.0 million in 2.85% Senior Unsecured bonds due 2023, issued at par for a spread of T + 132 bps, and;
Tranche B: US$800.0 million in 3.20% Senior Unsecured bonds due 2025, issued at par to yield T + 162.3 bps;
We said on our report of yesterday (https://insights.tellimer.com/article/latam-making-sense-of-recent-issues), that we believed that looking at the bank's US$1.10 billion, 5.75% subordinated bonds due 2022 (Ba3/NR/B+) that were seen trading at cUS$105.884 (ALLQ) to yield c2.85% (g-spread: 131bps; z-spread: 124bps) and its subordinate status, in our view the initial price guidance for the new senior unsecured bonds is way too generous. We said that final pricing, in our view, could be in the 2.75% area for the 2023, and in the 3.0% area for the 2025, making the final terms attractive, in our view;
Regarding upcoming issues, there iss a lot of activity for the coming days (including today):
Brazil's Companhia Siderurgica Nacional, CSN (CSNABZ) is planning to issue a "benchmark-size" (which we believe could be between US$500.0 million and US$1.0 billion) through its subsidiary CSN Islands XI, in 8-year (non-call 4) Senior Unsecured bonds rated B2/NR/B, with Initial Price Guidance "in the low 7.0% area". Looking at the company's subsidiary CSN Resources, S.A.'s currently outstanding US$600.0 million, 7.625% Senior Unsecured bonds due 2026 that are currently trading at around US$106.184 (ALLQ) to yield approximately 6.19% (G-Spread 468 bps; Z-Spread 464 bps) we believe that final pricing for the 2028 new issue could be closer to 6.50% to 6.75%. Pricing is expected today;
Chile's Engie Energia Chile (ECLCI) is planning to issue a "benchmark-size" (which we believe could be around U$500.0 million), 10-year Senior Unsecured bond (BBB/BBB) with Initial Price Guidance "in the very low 200 bps". The Company's currently outstanding US$350.0 million, 4.50% Senior Unsecured bonds due 2025 are seen trading at around US$107.576 to yield approximately 2.86% (G-Spread 131 bps; Z-Spread 131 bps) and 4.465 years' duration. based on this reference bond, we believe that the new 10-year issue could price closer to the 150 bps to 175 bps range;
In Colombia, Bancolombia (BCOLO) is planning a 5-year "benchmark-size" bond (Baa2/NR/BBB) with Initial Price Guidance of T + 190 bps, suggesting from the ratings, that this will be a Senior Unsecured bond. There are two bonds that we believe should be as reference:
1) BCOLO's US$750.0 million, 4.875% Subordinated bond due 2027 (Ba3/NR/BB+) currently seen trading at around US$103.537 (ALLQ) to yield approximately 3.50% (G-Spread 199 bps; I-Spread 194 bps), and;
2) BCOLO's US$4.357 million, 5.95% bonds due 2021, which we use despite the low remaining amount outstanding, because these securities are the only U.S. dollar-denominated Senior Unsecured bonds issued by the bank. These bonds are currently seen trading at US$105.357 (ALLQ) to yield approximately 1.91% for a G-Spread of 39 bps and a Z-Spread of 28 bps;
Based on the above reference bonds, we believe that Bancolombia's new 5-year will probably price tight to the 2027 Subordinated bonds, both because of their 2025 maturity and because of their Seniority relative to the Subordinated '27s. Therefore, we estimate that final pricing for the new Senior Unsecured 2025's could be within a range of between T + 175 bps and T + 185 bps.
Also in Colombia, Credivalores-Crediservicios, SA (CREDVA), a non-bank financial institution rated B/B+ is initiating a series of fixed-income investor meetings with the aim to issue Senior Unsecured bonds in order to finance a concurrent any-and-all cash tender offer for its outstanding US$325.0 million, 9.750% Senior Unsecured bonds due 2022, as well as for other debt repayment and general corporate purposes;
The 2022's are currently trading at around US$106.248 (ALLQ) to yield approximately 6.59% (G-Spread 505 bps; Z-Spread 483 bps) and no guidance has been given yet on size, tenor, or Initial Price indications for the new bonds. We expect this deal to be next week's business.