h)TûLETSûYOUûBUYûAûDOLLARûBONDûATûTHEûOFlCIALû
EXCHANGEûRATEûBUTûTHEYûAREûASKINGûYOUûFORûAû
LOWERûRATEûINûEXCHANGE vûSAIDûONEûLOCALû
banker.
In contrast, YPF’s US dollar 8.75% 2024
bond is now trading with double-digit yields
in the international secondary market,
ACCORDINGûTOû-ARKET!XESSûDATA
Aside from pricing, some corporates are
SIMPLYûlNDINGûITûEASIERûTOûRAISEûMONEYû
through local bonds even if they have cash
they can use offshore.
“For corporates if you have dollars outside
the country and you need them to pay bills
locally, you don’t want to bring back dollars
with everyone waiting for the peso to
weaken,” said Walter Stoeppelwerth, chief
INVESTMENTûOFlCERûATû0ORTFOLIOû0ERSONALû
Inversiones in Buenos Aires.
“Dollars are precious and you don’t want
to use them if you don’t have to.”
While the deals are small with short
tenors, the surge in local activity stands out
when coronavirus-induced volatility and an
upcoming sovereign debt restructuring have
brought other markets to a standstill.
Uncertainty over debt issued by the
government - which has already delayed
payments on some local law bonds - makes
corporate debt an attractive option.
“High-net-worth individuals and
treasuries have been tempted to put money
to work in high-quality names as they don’t
have much of an alternative,” said a New
York-based investor.
Corporate deals are seen as a better option
than putting money in bank deposits or debt
issued by a sovereign that could ask for a
haircut in future.
“Argentina corporates are not very
indebted overall and investors believe there
is a high willingness to pay,” said
Stoeppelwerth.
Hopes are that after restructuring the
economy can start to grow again or at least
open the way for corporates to re-access
international capital markets.
“As long as you resolve the sovereign debt
(problem) that would make it a lot easier for
corporates to tap the international markets
even if the Argentine economy is not
thriving,” said the investor.CHILE
COLBUN BREAKS LULLCOLBUN seized its chance last Tuesday to
break the lull in the Latin American primarymarket, drawing good demand for the
REGIONSûlRSTûDOLLARûDEALûINûNEARLYûTWOû
weeks.
The Chilean utility came on yet another
volatile day for the markets as fears over the
spread of the coronavirus globally and its
impact on growth continued to shake
sentiment.
A half percentage point cut in rates
by the Federal Reserve did little to calm
markets.
However, the borrower managed to
garner a US$3.3bn order book, allowing
it to price US$500m of 10-year bonds
at Treasuries plus 240bp, nicely inside
initial price thoughts of plus 262.5bp
area.
Colbun, rated Baa2/BBB, had been
EXPECTEDûTOûPRICEûTHEûDEALûTHEûWEEKûBEFOREû
AFTERûlNISHINGûMEETINGSûONû&EBRUARYû ûBUTû
opted to stand down in the face of volatile
conditions.
Even on pricing day it held off until
relatively late in the morning to announce
the deal, after the US high-grade market
showed signs of life with several borrowers
emerging last Tuesday.
7ITHûAûmIGHTûTOûSAFETYûBIDûPUSHINGû
the 10-year US Treasury yield below 1%,
Colbun was able to lock in a 3.15%
coupon and a yield of just 3.335%,
recent lows for the company, according
to IFR data.
“I think in terms of yield this was
PROBABLYûEXPENSIVE ûBUTûINûTERMSûOFûSPREADû
for crossover investors it could be seen as a
bet on Colbun returning to spreads of sub
200bp, which has been the average on [their
bonds],” said a banker.
Indeed, its 3.95% 2027s were trading at a
G-spread of 174bp the week before.
“We like the credit,” said Omotunde
Lawal, head of the emerging markets
corporate debt group at Barings.
Not only does Colbun enjoy solid credit
fundamentals, but it is in a sector that is
unlikely to be hit by supply chain
disruptions due to the coronavirus, said
Lawal.
“The utility space, TMT, and food
and beverages are three sectors that
you’re unlikely to get much of an
impact because these are essential items,”
she said.
“Everyone needs to have heating and
water, and everyone needs to have food.”
In a note last month, Fitch underscored
the company’s ability to generate strong
CASHmOWS ûITSûROBUSTûLIQUIDITYûPOSITIONûANDû
conservative capital structure with totalDEBTûTOû%BITDAûEXPECTEDûTOûSTAYûINûTHEûXû
range.
0ROCEEDSûOFûTHEûTRANSACTIONûAREûEXPECTEDû
to fund a tender offer for the company’s
4.5% 2024 notes.
Bank of America, JP Morgan and Scotiabank
led the deal.MEXICO
CFE PRINTS ITS LARGEST FORMOSA-EXICANûSTATE
OWNEDûUTILITYûCOMISION FEDERAL
DE ELECTRICIDAD has priced a US$900m
30-year amortising Formosa bond despite
market volatility that has deterred other
issuers.
The senior unsecured bond priced at par
TOûYIELDû ûTHEûTIGHTûENDûOFûlNALû
guidance of 4.05%–4.10%.
“While some bank Formosa deals that
are heavily sensitive to interest rate
movements have been delayed, as a high-
grade corporate EM bond, CFE printed its
largest ever issue size this time,” said a
global markets head in Taiwan who worked
on the deal.
Apple, which printed a US$1bn 30-year
non-call three Formosa in March 2017,
called the bonds on March 3 without issuing
a new deal, he said.
#&%SûBONDSûHAVEûEXPECTEDûRATINGSûOFû
Baa1/BBB+/BBB, in line with the issuer. The
Reg S deal amortises in equal annual
amounts from 2021 and has a weighted
average life of 15.5 years.
CFE came out with a similar structure in
July when it priced a US$615m 30-year
amortising Formosa bond with the same
WAL.
The latest deal offers a new issue
premium of 10bp–15bp but has the lowest
coupon of CFE’s Formosa bonds, according
to the banker. The notes had strong anchor
orders from Taiwan.
BNP Paribas, Deutsche Bank and HSBC were
bookrunners.
CFE has sold US dollar 30-year Formosa
bonds in each of the past three years,
ACCORDINGûTOûDATAûFROMûTHEû4AIPEIû%XCHANGE
(ISTORICALLY ûGLOBALûlNANCIALûINSTITUTIONSû
have been the dominant issuers in the
callable Formosa bond market.
!NOTHERû$#-ûBANKERûATûAûSECURITIESûlRMû
in Taiwan said that lifers as well as global
banks are looking for a new yield level in a
lower rate environment since the Federal
Reserve cut rates by 50bp on Tuesday over
coronavirus concerns.62 International Financing Review March 7 20208 IFR Emerging 2323 p 55 - 62 .indd 62 06 / 03 / 2020 19 : 04 : 34