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More high-grade issues from Chile

    Rafael Elias
    Rafael Elias

    Director, Latin America Credit

    Tellimer Research
    10 January 2020
    Published byTellimer Research

    Two Chilean companies Embotelladora Andina, S.A. (ANDINA) and Sociedad Quimica y Minera Soquimich (SQM) are all set for road shows to market new bonds.

    Embotelladora Andina, S.A. (ANDINA), the largest Coca-Cola products bottler and distributor in Chile, Argentina and Paraguay, and the third largest in Brazil in terms of sales volume, will start a road show on 13 January to market a new bond with “an intermediate-to-long maturity”, expected to be rated BBB/BBB+.

    The company’s only USD-denominated bond is a US$365.0mn (out of an originally-issued amount of US$575.0mn) senior unsecured bond with a 5.0% coupon, due 2023. This bond is seen trading at cUS$108.066 (ALLQ) to yield c2.70% (g-spread 110bps; z-spread 108bps).

    While there are still no indications on size or tenor, we believe that the new bond will be between US$500mn-1bn, with a maturity of between 7 and 10 years. We base this on recent transactions coming out of Chile, which suggest that these amounts and tenors appear to be the “sweet spot” for investors’ demand on this type of deals.

    No initial price guidance has been given as yet, but we believe that if ANDINA issues a 7-year bond, the pricing could be around T+150bps, whereas if the bond is issued with a 10-year maturity, we could see it price at around T+175 bps. We expect to get more information on this deal next week.

    Sociedad Quimica y Minera Soquimich (SQM), one of the world’s leading producers of potassium, nitrate, iodine and lithium, is also on the road marketing a new “medium-to-long” maturity bond expected to be rated Ba1/BBB+/NR.

    The company’s longest currently-outstanding bond is its US$450.0mn, 4.25% senior unsecured bond due 2029, seen trading at cUS$107.008 (ALLQ) to yield c3.35% (g-spread 154bps; z-spread 161bps). We believe SQM’s new issue will also range between US$500mn-1bn (which we believe is most likely given the upcoming maturity of its US$250.0mn, 5.50% senior unsecured bond due 21 April 2020 and its US$300.0mn, 3.625% senior unsecured bond due 2023). We also believe that SQM will prefer to go longer, issuing perhaps a new 10-year bond which, given where the 2029 is trading, should price at a level of around T+160 to T+175, in our view. No initial price guidance has been given yet.

    As mentioned in a previous report, Chile continues to dominate the LatAm primary market, and more notably, all the new issues so far have been high-grade, pricing at levels we believe have been tight. All of this seems to suggest that investors remain confident on Chile’s economy, despite the ongoing (yet fading) political turmoil.