Flash Fixed Income Report /

Brazil: Marfrig's SPV to issue sustainable bond

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    30 July 2019
    Published by

    Marfrig's special-purpose vehicle (SPV) NBM U.S. Holdings Inc. is expected to come to the capital markets with a new senior unsecured, sustainable bond, guaranteed by Marfrig Global Foods S.A., MARB BondCo PLC, Marfrig Holdings Europe B.V. and Marfrig Overseas Ltd.

    The amount to be issued is still to be determined, but the bond will have a 10-year maturity (non-call five) and is expected to be rated BB-/BB-.

    This bond will be labeled as "sustainable" as its use of proceeds will be to purchase cattle in the Amazon Biome region in Brazil, contributing to the preservation of the environment in what the issuer describes as a "Sustainable Transition Project" and aligned with the four core components of the green bond and social bond principles, as per guidelines published by the International Capital Markets Association (ICMA).

    The initial price guidance puts the new issue in a "high 6% to 7%" range – we expect it to price closer to the lower end. As a reference, NBM U.S. Holdings Inc.'s longest currently outstanding bond, a BB-/BB- rated US$1.0bn 7.0% senior unsecured bond due 2026, trades at cUS$104.265 (ALLQ) to yield c6.11% (g-spread 424bps, z-spread 428bps) and a duration of c4.812 years.

    Since we expect the bond to receive additional demand from sustainable investors (in addition to the traditional holders of senior unsecured Latin American bonds), we believe the new issue will see a strong order book that will allow the company to print, as stated before, around the lower end of the guidance, in the mid-6%s.

    Pricing of the bond is expected to take place today.