Colbun eyes LM after Itaú restarts Lat Am

Colbun eyes LM after Itaú restarts Lat Am

Chilean power generator Colbún will begin investor meetings on February 21 with the publication of full year financial reports set to trigger a second wave of new Latin American issuance for the year.

After Brazilian lender Itaú sold $700m of tier one capital in its second international deal of 2020 on Wednesday,the following day Colbún announced its borrowing plans as it seeks to buy back as much of a 2024 bond as it can.

Bank of America, JP Morgan and Scotiabank are global coordinators on the bond. They will take Baa2/BBB/BBB rated Colbún to Miami, Boston, London and New York between February 21-26. Santander is a bookrunner.

A note sent to investors said that the company would be looking for a US dollar benchmark with an “intermediate to long maturity”. It came alongside the launch of a tender offer for the company’s 4.5% 2024s, of which $500m is outstanding.

“All of Colbún’s bonds are $500m, so they’re going to be chasing a really strong response to the tender as they look to replace one bond with another,” said one Lat Am syndicate banker. “They are offering 8.75 points plus par for a four year note, and a roughly 50 cent pickup to secondary levels.

“For a four year maturity in this market that’s not a bad offer.”

The 2024s’ bondholders have until 5pm on February 26 to sell their notes at 108.75 cents on the dollar.

According to Moody’s, any remaining proceeds will be used to fund capital expenses on new projects.

“Fourth quarter numbers are being released thick and fast,” said another Lat Am syndicate banker in New York. “While we’re not going to be as busy as in January, there’s still plenty to do from Latin America.”


Itaú notches AT1

Latin America’s largest private sector lender, Itaú was one of the first companies in the region to release earnings last week. It then hit bond markets for the second time this year, following January’s senior unsecured deal with an additional tier one perpetual note.

Yields on Itaú’s most recent AT1, a 6% note callable in 2023, have tightened by 100bp in the last three months to around 4.25%, and the bank was tempted enough to become the first Latin American credit to issue using its full year earnings numbers.

BofA, BTG Pactual, Goldman Sachs, Itaú and JP Morgan set initial price thoughts at low-5% area for the new non-call five perp. It was heard attracting nearly $5bn of orders.

This allowed the Ba3/BB-/BB rated Brazilian bank to bring in guidance to 4.75%, plus or minus 0.125%, before launching a B2/—/B rated $700m deal at 4.625%.

“It looked as straightforward as they come,” said one syndicate banker away from the deal. “It’s a well-known name, and it’s senior deal came super tight, so it’s natural that investors jumped on a bit of yield.”

That said, market conditions have improved to the point that Itaú was able to raise AT1 funding 137.5bp cheaper than it last did so, nearly two years ago.

According to Moody’s, principal on the bonds will be fully written down if Itaú’s regulatory common equity tier one capital ratio is below 5.125%; if a public sector capital injection is necessary; if the central bank determines the write-down is necessary; or if the central bank assumes control of the bank.

For the rating agency, a common equity tier one capital ratio would be Itaú’s point of non-viability. The bank reported a ratio of 14.4% in December 2019. In Brazil, the minimum ratio is 4.5%.

In January, Itaú sold $1.5bn of three and five year senior bonds.

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