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LatAm new issues: The turn of Paraguay corporates

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    21 January 2020
    Published byTellimer Research

    Several Paraguayan corporates plan to issue new bonds in the international markets. There are differing degrees of information available at this stage, and the timing of the new prints are likely to be spread out over this week and, perhaps, flow into next next.

    First up is Telefonica Celular del Paraguay S.A.E. (TCDPSA), which is planning to issue a US$250m senior unsecured tap to its outstanding US$300mn 5.875% bonds due 2027 (Ba1/NR/BB+), which trade at cUS$108.013 (ALLQ) to yield c3.39% (g-spread 185bps; z-spread 177bps). Initial price guidance is, in our view, attractive and could perhaps rise to converge with the price of the outstanding bonds, in the US$105.75 area.

    TCDPSA is a leading telecommunication services provider in Paraguay, 100% owned by Millicom International Cellular S.A.

    The proceeds are expected to be used to repay certain local borrowings and for general corporate purposes, including distributions to the shareholder. The 144A portion of the tap will be immediately fungible, whereas the Reg S portion will be fungible after 40 days. Pricing is expected today.

    The second issuance will be from Frigorifico Concepcion S.A. (FRCOPY), also a Paraguayan corporate and a leading beef processing company in the country (with one Bolivian subsidiary, Frigorifico BFC S.A., which operates the company's slaughterhouse operations in Bolivia and in which FRCOPY owns a 51% equity interest). FRCOPY is Paraguay's second-leading exporter of beef (as of 2018) and its principal activities include: industrial refrigeration, slaughtering, deboning, processing, marketing and distribution of beef products and by-products. As of H1 19, exports represented 80.1% of the company's gross revenue and its primary markets are Russia, Brazil, Chile, Taiwan, the UAE and Israel. Russia has been FRCOPY's largest export market in recent years, accounting for 34% of total exports during H1 19.

    Frigorifico is planning a debut issue in the international markets. The company has PYG10bn of 14% secured bonds outstanding due 28 January. The expected U.S. dollar-denominated bonds are also likely to be senior secured by first-priority security interests in:

    1. A debt service reserve account established by and maintained with the trustee in New York;
    2. A collections account established by and maintained with the local trustee in Asunción, Paraguay;
    3. An escrow account established by and maintained with the local trustee in Asunción;
    4. Certain real estate property and equipment of the company, located in Paraguay;
    5. Certain trade receivables of the company;
    6. The capital stock in the company owned by Jair A. de Lima, comprising 97.96% of the company’s outstanding common shares;
    7. The capital stock in the guarantor owned by the company, comprising 51% of the guarantor’s outstanding common shares; and
    8. Any collections received with respect to the foregoing items.

    The proceeds will be used to repay outstanding credit facilities amounting to cUS$80mn, to repay domestic bonds amounting to cUS$20m, to fund the debt service reserve account, to fund the escrow account and for general corporate purposes.

    There is still no information available that we are aware of on timing and/or price guidance.