4HEREAFTER ûBUTûBEFOREûTHEûEXPIRATIONûDATEû
OFû.OVEMBERû ûTHATûPRICEûDROPSûTOûPARû4HEû
BONDSûHAVEûBEENûTRADINGûATûAROUNDû û
ACCORDINGûTOû2ElNITIVûDATA
The company cancelled a tender for the
same securities in April after offering a
buyback price of 105.00.
The bond’s coupon steps up to about
BPûOVERûTHEûlVE
YEARû4REASURYûNEXTûYEAR û
equating to a considerable cost to the issuer
IFûTHEûSECURITYûISûNOTûTAKENûOUT ûAûSOURCEûTOLDû
IFR.
BB Securities and BTG Pactual are acting as
dealer-managers.
CHILE
ENAP PRINTS IN TOUGH MARKETState-controlled oil company ENAP put its
best foot forward in a rough day for the
primary market last week when it issued a
new US$680m 11-year amortizing bond.
The deal came on a day that saw a
NUMBERûOFûISSUERS ûINCLUDINGûTHOSEûINûTHEû53û
HIGH
GRADEûMARKET ûSTRUGGLEûWITHûPOSITIVEû
price progression.
And ENAP was no exception. Starting at
initial price thoughts of Treasuries plus
BPûAREA ûLEADSûTIGHTENEDûTOûPLUSûBPû
BP ûBUTûTHEYûSTOPPEDûTHEREûTOûPRINTûATû
99.915 to yield 5.261% or 215bp over.
The buyside has typically let ENAP’s poor
credit metrics slide - gross debt to Ebitda
JUMPEDûTOûXûLASTûYEAR ûACCORDINGûTOû&ITCHû
û
and focused on strong government support
instead.
And while investors were once again
WILLINGûTOûBUYûONûTHISûOCCASION ûAûBROADû
sweep of accounts wasn’t there to support
the deal.
"OOKSûWEREûHEARDûTOûBEûABOUTûXû
SUBSCRIBED ûWITHûPAPERûSOLDûINûLARGEûPARTûTOû
MONEYûMANAGERSûWITHûNOûmEXIBILITYûONû
pricing.
Aside from a volatile market that has
KEPTûMANYûINVESTORSûSIDELINED ûTHEû
amortizing structure didn’t sit particularly
well with certain buyside accounts who
prefer bullets.
The senior unsecured bonds will amortize
INûTHREEûEQUALûINSTALMENTSûINûYEARSû ûûANDû- Average life is 10 years. Proceeds are
BEINGûUSEDûTOûRElNANCEûEXISTINGûDEBTûANDûFORû
general corporate purposes.
%XPECTEDûRATINGSûAREû"AA"""
!ûBank of
America Merrill Lynch ûCitigroup and Scotiabank
acted as bookrunners.
COSTA RICA
REPUBLIC’S BONDS SINK AS FISCAL
CONCERNS RISE!ûlSCALûCRISISûINûCOSTA RICA is coming to a
head as the government struggles to roll
over debt and pass vital reforms to get the
COUNTRYSûlNANCESûBACKûONûTRACK
Investors are increasingly worried about
HOLDINGûTHEûSOVEREIGNSûDEBT ûASûITSûCREDITû
metrics have gone from bad to worse after
YETûANOTHERûDELAYûINûlSCALûREFORMS
The government tried to extend
maturities through a US$3bn or so debt
exchange of local currency bonds last
MONTH ûBUTûWITHûLITTLEûSUCCESS
With a participation rate of just 6% in the
lRSTûLEGûOFûTHEûSWAPûFORûSHORTER
DATEDûDEBT û
sovereign dollar bonds took another turn
lower last week.
The 2025s and 2045s fell between a point
and 2.25 points last week to trade at 81.75–
82.75 and 82.25–83.25 on Thursday.
Costa Rica has been one of worst
PERFORMERSûAMONGûû,ATINû!MERICANû
COUNTRIESûOVERûTHEûûDAYSûUPûTOû4HURSDAY û
with spreads widening 67bp over that
PERIOD ûACCORDINGûTOû)#%û"!-,ûDATA
Analysts and investors estimate that the
government still has anywhere between
53BNûANDû53BNûTOûRAISEûTHISûYEAR ûBUTûITû
remains unclear just how it will cover those
needs.
That tally does not include a US$850m or
so short-term loan extended by the central
BANKûTOûHELPûlLLûAûFUNDINGûGAPûLASTûYEARûnûAû
move that the market did not take well.
“The government insists they will pay it
BYûYEAR
ENDû)TûISûNOTûAûPRETTYûSITUATION vûSAIDû
0ETARû!TANASOV ûCO
HEADûOFûSOVEREIGNû
research at hedge fund Gramercy.
“It is a plausible scenario that the Costa
Rican government is faced with a liquidity
CRISISûBEFOREûYEAR
ENDv
4HEûGOVERNMENTûNEEDSûTOûPASSûVITALûlSCALû
reforms – which are held up on the court
SYSTEMûnûTOûGETûITSûlNANCIALûHOUSEûINûORDER
"UTûWITHûEXPECTATIONSûTHATûALREADYûWEAKû
REFORMSûWILLûBEûWATEREDûDOWNûFURTHER ûmarkets are sceptical that the government
can see itself through the current crisis.
“The base case is that they will get
SOMETHINGûTHROUGH ûBUTûITûWILLûBEûAûWATEREDû
DOWNûBILL vûSAIDû3IOBHANû-ORDEN ûHEADûOFû
,ATINû!MERICAûlXED
INCOMEûSTRATEGYûATû
Nomura.
“Fiscal reform isn’t enough to provide a
POSITIVEûSHOCK ûANDûYOUûWONTûGETûAûRELIEFû
RALLYû;ONûTHEûBACKûOFûTHEûREFORMS= vûSHEûTOLDû
IFR.
And the country’s credit ratings remain
under pressure.
%ARLIERûLASTûMONTH û-OODYSûPLACEDûITSû"Aû
RATINGûONûREVIEWûFORûDOWNGRADE ûCITINGû
worsening debt indicators and funding
pressures.
That follows Fitch’s decision earlier this
YEARûTOûCHANGEûITSûOUTLOOKûONûITSû""ûRATINGûTOû
negative.
Metrics that measure debt sustainability
do not look good.
Debt service as a percentage of spending
NOWûSTANDSûATû ûHIGHERûTHANûTHEûûFORû
3INGLEû"ûRATEDû%CUADORûANDûONûPARûWITHû%Lû
3ALVADOR ûWHICHûISûRATEDû"### ûACCORDINGû
to Nomura.
h4HEûBIGGERûSTORYûISûTHEûlSCALûREFORMûTHEYû
have been trying to push through for years
ANDûYEARS vûSAIDû!TANASOVûATû'RAMERCY
h4HEûlSCALûSITUATIONûLOOKSûUNSUSTAINABLEûIFû
THEYûDONTûPASSûMEANINGFULûREFORMv
The government’s interest-to-revenue
RATIOûISûNOWû ûPUTTINGûITûCLOSEûTOû
"ARBADOS ûWHICHûISûUNDERGOINGûAû
RESTRUCTURING ûHEûSAID
The next test is the launch of a US dollar
global depositary note governed by local
LAW ûTHOUGHûPARTICIPATIONûONûTHATûDEALûISûALSOû
EXPECTEDûTOûBEûLOW û-ORDENûWROTE
“This would represent a shortfall on
designated funds for repayment of the
CENTRALûBANKûLOANûANDûTHENûFORCEûOFlCIALSûTOû
source alternative creative funding via intra-
GOVERNMENTûENTITIES vûSHEûWROTEMEXICO
ENGENCAP MARKETS SUBORDINATED
PERPENGENCAP is marketing a subordinated
perpetual US dollar bond offering to
FOREIGNûACCOUNTS ûACCORDINGûTOûANûINVESTORû
source.
4HEûCOMPANY ûWHICHûSPECIALISESûINûTHEû
LEASINGûANDûBUSINESSûlNANCINGûINDUSTRY û
ISûSEEINGûINVESTORSûINûTHEû53 û%UROPEûANDû
Asia. Meetings are expected to end on
November 6.
Morgan Stanley is acting as global
coordinator as well as joint bookrunner
with Credit Suisse ûGoldman Sachs and
Scotiabankû%XPECTEDûRATINGSûAREû""EMERGING MARKETS AMERICASALL INTL EMERGING MARKETS BONDS
BOOKRUNNERS: 1/1/2018 TO DATE
Latin America
Managing No of Total Share
bank or group issues US$(m) (%)
1 Citigroup 36 13,008.26 16.6
2 JP Morgan 30 9,494.86 12.1
3 HSBC 16 7,142.33 9.1
4 Deutsche Bank 8 6,386.75 8.2
5 Morgan Stanley 12 4,656.11 6.0
6 BAML 18 4,618.99 5.9
7 Santander & Invest Bkg 14 3,278.11 4.2
8 BNP Paribas 11 3,127.94 4.0
9 BBVA 4 2,811.40 3.6
10 Credit Suisse 9 2,304.90 2.9
Total 87 78,182.50
Excluding equity-related debt.
Source: Refinitiv SDC code: L3