In our report yesterday, we said we believed the new issue from Banco de Credito del Peru (BCP) in Peruvian soles (PEN) was attractive at the price guidance given of 4.9%, given the high quality of the credit. In the event, the bank issued PEN2.5bn at a tighter spread, yielding 4.65%; however, we still regard it as attractive.
The proceeds of the issue will be used to refinance BCP's PEN2.0bn 4.850% notes due 2020 (Baa1/BBB+/BBB+), which trade at cPEN101.579 (ALLQ) to yield c3.37% (to worst), for a g-spread of 113bps and an i-spread of -11.4bps, and have a duration of 1.045 years.
The new PEN bonds will mature on 17 September 2024, are senior unsecured and were issued at par with the corresponding 4.65% coupon.
We believe the yield adequately compensates investors for currency risk, particularly since PEN has been fairly stable and there are no signs of this changing. Compare this bond with the bank's U.S. dollar-denominated US$716.301mn 4.25% senior unsecured bond due 2023, which trades at cUS$105.778 (ALLQ) to yield c2.53% (g-spread 83bps; z-spread 87bps) and has a duration of 3.27 years. In our opinion, the +200bps differential more than compensates investors for the (limited) currency risk.
We do not have a recommendation on BCP.