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LatAm new issues update

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    2 May 2019
    Published by

    We provide an update on the deals that are expected to price today (2 May) and the announcement of a new Paraguayan issue that could price next week.

    1) Chile's Sociedad Quimica y Minera de Chile's (Soquimich or SQM) expected US$350mn (target size), 10-year 144A/RegS senior unsecured notes are expected to be rated Baa1/BBB+, with initial price talk in the US Treasuries plus 200bps area.

    We believe these bonds will see strong demand from local pension funds, and also from cross-over investors who wish to pick up yield from comparable IG securities. 

    In our view, SQM could raise the size to US$500mn if demand proves strong and if the company can print at levels closer to T+185bps.

    2) NBM US Holdings, Inc., guaranteed by Brazil's Marfrig Global Foods, S.A., and companies in several jurisdictions including MARB BondCo Plc., Marfrig Holdings (Europe) B.V., and Marfrig Overseas Ltd, is expected to price a "benchmark-sized", seven-year senior unsecured bond rated BB-/BB- today (which we believe could be US$500mn-1.0bn). The proceeds are expected to be used to pay for a concurrent tender offer for the Group's 2021 and 2023 notes. 

    Initial price talk is in the mid-7%s, but we believe the company could print at c7.125%, as we expect strong demand, particularly in light of the IPO of certain assets that Marfrig Global Foods owns in the US, which should help the company reduce its debt and improve its leverage ratios.

    3) In Paraguay, we expect the issuance of senior secured notes by Bioceanico Sovereign Certificate Limited, an issuer set up for the funding of the construction of the Corredor Bioceanico highway. The notes are expected to mature in 2034 and have a weighted average life of nine years and be rated Ba1/BB/NR. The sovereign is rated Ba1/BB/BB+. 

    The notes will be secured by certificates that, according to preliminary issue documents, "constitute irrevocable, direct, general, unconditional and unsubordinated contractual payment obligations payable by the Republic of Paraguay."

    In addition, the issuer documentation also states that: "payment obligations thereunder will constitute public external debt carrying the full faith and credit of Paraguay".

    There is no price talk yet, but, based on Paraguay's 4.70% sovereign bonds due 2027 (which currently trade at cUS$104.751 (ALLQ) to yield c4.00%), we would expect the certificates/bonds to price at c4.50-4.75%.

    Given the lack of Paraguayan paper outstanding in the markets and the secured structure of the new securities, we would expect some demand, albeit not as strong as for the SQM and NBM bonds. Therefore, we do not see much room for the bonds to print tighter than the levels we have estimated and believe that the final yield will be a function of size and price. We might see the issuer needing to "sweeten" the deal in order to generate a strong order book.