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Latin America primary market gathers momentum

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    23 April 2019
    Published by

    New issues over the past week are further confirmation of our previously stated view that the LatAm primary market is building up strongly, particularly for high-quality credits issued in large size and with intermediate-to-long-term tenors.

    On 23 April, Brazil's JBS USA Lux, S.A., JBS USA Finance Inc. and JBS USA Food Company announced a US$700mn add-on to their respective currently outstanding 2024, 2025 and 2029 senior unsecured notes. This was issued to pay back (in tandem with cash on hand) US$1.0bn of an outstanding term loan and, at the same time, reduce the companies' secured debt (the loan) and extend the debt maturities.

    The companies also announced that they intend to refinance the US$1.9bn balance of the term loan due in 2022 with a new term loan due in 2026.

    On 18 April, Chile's Celulosa Arauco y Constitucion, S.A. (CELARA), one of the world's leading forest plantation owners and producer of pulp and wood products, announced that it would hold investor meetings on 22 April and 24 April to issue a senior unsecured 144A/RegS bond denominated in US dollars with intermediate-to-long-term maturity and expected ratings of Baa3/BBB-/BBB.

    The proceeds would be expected to be used to fund an offer to purchase the company's outstanding 7.25% bonds due 2019 and its 5.0% bonds due 2021, totalling a combined US$400mn. We expect the new issue to be US$500mn or higher, depending on market conditions, and to generate strong demand from local pension funds, which are likely to allow CELARA to price tight.

    Finally, on 23 April, Panama's Empresa de Transmision Electrica (ETESA) a 100% government-owned electricity transmission company with a legal monopoly over the transmission, dispatch and control of electricity in Panama and responsible for electricity-generation planning, announced a series of investor meetings to issue a "benchmark size" (we expect US$1.0bn or more) 144A/RegS senior unsecured bond with a long-term maturity and an amortising schedule. The bonds are expected to be rated Baa1/NR/BBB. The meetings are expected to be concluded by 24 April, with pricing and the issue following.

    There are no initial price talks yet, to our knowledge, for either the CELARA or the ETESA bonds; however, we expect strong demand and believe the bonds will be suitable for high-grade and cross-over investors.