Three borrowers visit LatAm primary bond market as July Fed meeting looms

News Analysis 23 June

Three borrowers visit LatAm primary bond market as July Fed meeting looms

By Alvaro Ledgard

Three Latin American corporates raised funds in the international bond markets this week, looking to get ahead of the usual North American summer lull and a US Federal Reserve rate hike that the markets are now anticipating for July, according to two investors.

The Fed decided to pause its 15-month hiking process during its last meeting on 14 June, as it sought to achieve maximum employment and inflation at the rate of 2% over the long run. Despite the pause, Fed chair Jerome Powell hinted at two more rate hikes before the end of the year. The next meeting is scheduled for 25-26 July.

“Borrowers are looking to get ahead of the summer lull and the Fed 25bps hike for July that seems to be anticipated by the market,” the first investor said.

CMPC [SN: CMPC] started things off by pricing a USD 500m 2033 sustainability-linked green bond at 99.985 with a 6.125% coupon to yield 6.127%, or UST+ 240bps, on Tuesday 20 June, the first day of a short week in the US.

The Chilean pulp, paper and forestry company had set initial price thoughts of UST+275bps-area earlier that day, and was expected to use proceeds to refinance expenditures and investments related to eligible green projects.

BofA, JPM and Scotia managed the deal as bookrunners.

The new notes last traded 23 June, at 100.94 to yield 5.997%, according to MarketAxess.

Cosan [NYSE: CSAN] started holding fixed-income investor calls that same day, before pricing a new USD 550m 2030 non-call three-year senior unsecured bond at par with a 7.50% coupon two days later, on 22 June. The Brazilian conglomerate had set initial price thoughts of high-7% earlier that day.

Itau BBA and Morgan Stanley managed as global coordinators, while Bradesco BBI, BTG Pactual, Citi, JPMorgan, Santander and UBS acted as joint bookrunners.

Cosan planned to use USD 250m of the proceeds to fund a tender offer targeting its 7% 2027 notes that was launched 20 June, with the rest expected to be used for general corporate purposes.

The investor meetings were attended by investors from Europe, the Americas and Asia and final demand ended up coming in at over three times the final amount that was offered.

“Cosan has an impeccable track record in the market, investors respect that,” said a banker close to the deal, who also mentioned that the company’s acquisition of a stake in Vale in October 2022 was a recurrent theme during the calls.

The new notes traded 23 June at 100.6 to yield 7.374%.

Finally, BBVA Mexico [MX: BBVA] returned to the international debt markets after an almost three-year hiatus by issuing a USD 1bn 2038 non-call 10 subordinated tier 2 bond at par with a 8.45% coupon on Thursday, 22 June. The bank had set initial price thoughts of 8.75%-area earlier that day.

The funds raised by the contingent-convertible Basel III-compliant bonds were expected to be used to strengthen the Mexican bank’s capital ratios and for general corporate purposes.

BBVA Mexico’s new bond last traded 23 June at 100.301 to yield 8.406%.

Looking ahead, Paraguay was planning to issue a USD 500m international bond in the coming weeks, while Chile and Uruguay  were conducting non-deal meetings with investors in London.

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