Having held investor calls on Monday and Tuesday, Ba2/BB rated BRF on Wednesday set initial price thoughts at mid-6% area for a proposed senior unsecured 30-year deal and built a book of around $5bn.
Like Mexican lender BBVA Bancomer the day before, BRF had set the size at $500m, will-not-grow, from the outset, and this allowed for hefty tightening without affecting the quality of the book.
Leads BB Securities, Bradesco, BTG Pactual, Citi, Itaú, JP Morgan, Morgan Stanley and Santander then set guidance at 6% plus or minus 0.125% before launching a $500m September 2050 bond at the tight end, 5.875%.
“A 30-year bond for a double-B credit in the protein and processed foods sectors, with a crazy amount of demand,” said one banker on the deal. “You don’t see that every day.
“There was even major support from guys who had said at the start that they weren’t looking to add bonds in the 30-year space.
“This was a shockingly good result.”
BRF’s longest-dated bond is its January 2030s issued last year, meaning it was hard to put an exact number on the new issue premium.
But one syndicate banker had reckoned that fair value was in the 6% to low 6% range, comparing BRF to one of the few Brazilian high yield companies with a long-dated bond outstanding: pulp and paper producer Klabin, rated one notched higher than BRF at BB+/BB+. This comparison suggested BRF had not paid much for the curve extension.
While Klabin’s April 2029s are at around 3.95%, some 40bp inside BRF’s 2030s, the company’s April 2049s were trading at around 5.83% on Wednesday, just a few basis points inside where BRF priced.
“BRF’s new deal landed pretty much on top of Klabin and is already trading inside on the break, which is pretty remarkable,” said the banker.
After going free to trade at 4.30pm New York time, BRF’s new 2050s were around 1.5 to two points higher by the close.
BRF reoffered its new 5.75% 2050s at 98.247 to yield 5.875%.
Similar to most recent Lat Am corporate deals, demand dynamics were helped by use of proceeds: BRF is using the money raised to finance a buy-back of euro and dollar notes maturing between 2022 and 2026. This week’s deals from BBVA Bancomer and Cemex, and last week’s blow-out from Brazilian pulp and paper producer Suzano, will also be used mostly for debt refinancing.
Moody’s said the deal from BRF, which sells processed products as well as chicken and pork, will have “no material effect” on leverage.