Enap, rated A3/BBB-/A, was last in the market in July 2009 with a 10 year $300m bond. This latest 144A deal, coming soon after the sovereigns blowout $1.52bn bond last week, came essentially flat to its 2019s, with the coupon 100bp cheaper for the issuer compared with the 2019 deal.
However, bankers said Enap should be compared with its state-owned corporate counterpart, Codelco. At launch, Enaps 2019 notes offered a 100bp concession to Codelcos 2019s. By contrast, this weeks deal offered a 130bp concession over the copper producer, "which is historically cheap", said a banker not involved in the deal.
Last week, the Chilean sovereign issued a $1.52bn bond, split between dollars and pesos, achieving the lowest ever spread for a Latin American sovereign at 90bp over US Treasuries. As the Enap deal launched, the notes were trading at 87bp over. On this basis, the state backed Enap notes, with its change of control put, offer a 153bp premium. By contrast, Mexicos Pemex and Brazils Petrobras trade at 130bp and 85bp relative to the sovereign, respectively.
Bank of America Merrill Lynch, BBVA, BNP Paribas and Scotia Capital were the joint bookrunners for the sale. A banker on the deal said the 2020s attracted $4.25bn of demand from over 280 investors with "large participation from investment grade accounts, driven by the scarcity of high quality Chilean paper while Enap is an infrequent issuer".
"I am pretty surprised by the extent of the concession offered but I guess its a reflection of all the credit problems the oil company faces," said the head of Latin American debt capital markets at a US firm in New York.
Last week, S&P downgraded the company to BBB- from BBB, blaming volatile cashflow and profitability. Moodys has also put a negative outlook on its A3 rating, citing the companys $3.7bn debt. Fitch noted on Wednesday that the companys deteriorating credit metrics could be partially attributed to Februarys devastating earthquake. "Current debt levels are inconsistent with Enaps rating without the perception of strong parent support," the ratings agency noted.
Proceeds from the debt issuance are expected to pay for short term debt, although total net debt levels will not change. Over the medium term, the company will maintain a high leverage for its rating category, with a greater than six times debt-to-Ebitda ratio, according to Fitch.