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LatAm credit: New issues price tight

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    17 January 2020
    Published byTellimer Research

    The final pricing of yesterday's new issues came in generally tight, as we had anticipated.

    Here, we summarise our estimates and the final conditions:

    1) Chile's Sociedad Quimica y Minera Soquimich (SQM) issued US$400mn in 4.25% senior unsecured bonds due 2050 at a re-offer price of US$99.714 to yield 4.267% or T + 200bps. In our report yesterday, we expected the company would issue somewhere between US$500mn and US$750mn and that we would not be surprised if it went all-in and issued up to US$1bn. Although we over-estimated the size of the issue, our pricing estimate was along the lines of the final conditions since we said that we were expecting the new SQM to price at between T + 175bps and T + 225bps.

    2) Brazil's leading financial institution Itau Unibanco, through its subsidiary Itau Unibanco Holding (ITAU), issued two tranches of senior unsecured bonds:

    • Tranche A was US$1bn with a three-year maturity and priced at 2.9%. In our report yesterday, we estimated this tranche would price at that exact level. Given where its US$1.87bn 5.125% subordinated bonds due 2023 were trading, the initial price guidance in the 3.2% area was too generous.
    • Tranche B was US$500mn of senior unsecured bonds with a five-year maturity that priced at 3.25%. We also saw the initial price guidance in the 3.5% area for this tranche as likely to tighten and estimated final pricing of 3.25%.

    3) Brazilian media company Globo Comunicacoes e Participacoes (GLOPAR) issued US$500mn of 4.875% senior unsecured bonds due 2030. At the time of our preview report, initial price guidance was not available; however, we estimated final pricing could be in the T + 280bps to T + 285bps range. Since the bonds were issued at par, the final Issue spread was 306.9bps, making these new bonds quite attractive in our view. 

    For today's business, Grupo Aval Acciones y Valores, S.A. or Grupo Aval (AVALCB), Colombia and Central America's largest bank in terms of total assets, is running a series of investors meetings on 22-27 January with the aim of issuing "intermediate maturity" senior unsecured bonds, which we believe could be cUS$1bn in size, given the bank has US$1bn of 4.75% senior unsecured bonds due 2022 outstanding. These bonds currently price at cUS$104.944 (ALLQ) to yield c2.82% for a g-spread of 124bps and a z-spread of 118bps. The bonds have 2.514 years' duration.

    With no size, tenor or initial price guidance available yet, we believe AVALCB could be looking to issue somewhere between a 7-year and a 10-year; if it goes for a 7-year, the new bonds could price at around T + 150bps, whereas, if it goes for a 10-year, pricing could be in the T + 160bps area. Expected ratings for the new bonds are Ba2/NR/BBB.