The Republic of Ecuador returned to the international bond markets on Wednesday for its first issue since it defaulted in 1999.
The republic attracted a staggering $1.3jbn of orders for its $650m 10 year issue, rated Caa1/CCC+/B, largely because it offered a 10.75% yield. The deal was led by Deutsche Bank and JP Morgan.
In the Dominican Republic, AES Dominicana, a B- rated electricity company, priced $160m of 10 year non-call five bonds, after offering an 11% yield and a 648bp spread over Treasuries.
Led by ABN Amro, the deal was oversubscribed and traded up in the secondary market from par to 100.25 bid.
Just as surprising was investors' strong response to a $200m five year bond by Telecom Personal, the wireless telecom subsidiary of Telef—nica Argentina. JP Morgan marketed the bond in the US this week and is due to price it next week.
"Investors are taking one of two views as the year-end approaches and they close their books," said one banker in London. "They either want to park money in safe assets within the emerging market asset class, or they want to turbo-charge portfolios to boost 2005 returns. That's why we're seeing such a strong bid for high-yielding corporates and sovereigns in December."
Ecuador and AES Dominicana offered investors what is becoming a rare chance to buy an emerging market bond with a pick-up. Spreads have tightened so much that much emerging market paper is now trading inside comparably-rated US bonds.
With funds still pouring in to the emerging markets and an expected decline in new issuance next year, investors were willing to turn a blind eye to Ecuador's political volatility and AES Dominicana's erratic customer base, which is prone not to pay bills.
"The yield on the Ecuador bond attracted a lot of investors because they need something with carry and there is nothing like this that they can get in the sovereign market," said an emerging market syndicate manager in New York.
No need for Chavez
The deal attracted about 125 investors, many with orders of $40m-$50m. Venezuela's Hugo Chavez administration also put in its promised bid for $300m of the deal, but it was cut back.
"Venezuela expressed interest for around $200m to $300m," said a source. "They ended up getting bonds but they were not even the largest in the book."
The deal was priced at a deep discount of 91.692 so Ecuador could pay a 9.375% coupon. The bond traded as high as 92.75 during the week.
Proceeds will be used for liability management, more than likely to buy back some of Ecuador's 2012 global bonds. The 2012s have a 12% yield and Ecuador wants to lower its debt costs before next year's presidential elections.
The republic tried to issue in April but had to shelve the deal after political turmoil led to the ousting of President Lucio GutiŽrrez.
At a yield of 10.75% the deal came about flat to Ecuador's 2030s, once the call option on the longer-dated bond is taken into account.
"It was a great deal for investors," said one head of Latin American debt capital markets not involved in the trade. "It was priced to sell and if you want to own Ecuador — and I am sure out of the billions of dollars of inflows into emerging markets some people need Ecuador because it's in the index — it is probably the best bond to buy on Ecuador's curve."
Pricing above the parent
AES Dominicana, based in the Dominican Republic, which has only just gone through a sovereign debt restructuring and is infamous for its electricity blackouts, succeeded in issuing in this week's bullish market by pricing its $160m 10 year non-call five deal attractively, compared with other bonds from Latin American subsidiaries of its parent, the US company AES Corp.
Electricidad de Caracas (EDC) and Colombia's AES Chivor both have 10 year non-call five bonds maturing in 2014 trading at yields of 9.02% and 8.33%.
On a yield basis EDC trades about 173bp above the Venezuela 2014s and AES Chivor at about 166bp above the Colombian 2014s.
AES Dominicana's yield is about 270bp higher than the Dominican Republic's 2018s.
Managers from Argentina's Telecom Personal went on the road in the US this week and attracted a strong reception from investors for its $200m five year bond, led by JP Morgan.
The wireless subsidiary of Telef—nica Argentina is rated B- by Standard & Poor's and Fitch, with a stable outlook. The deal is part of, and conditional upon, Telecom Personal being able to raise a total of $380m in the local and international bond markets and with an internationally syndicated loan.
The local bond will be the Argentine peso equivalent of $50m, split into a one year fixed rate tranche and a three year amortising floater.
The loan, one of just a handful that international banks have extended to Argentine borrowers this year, will be up to $130m. It will include an 18 month tranche at 200bp over Libor and a two year tranche at 225bp over Libor.
All three parts are to be priced and closed in the next week, sources say.
Grupo Ultra, a Brazilian petrochemical company, is also due to price a dollar bond, led by Morgan Stanley and Santander, in the week ahead.
The Republic of Ecuador returned to the international bond markets on Wednesday for its first issue since it defaulted in 1999.
The republic attracted a staggering $1.3jbn of orders for its $650m 10 year issue, rated Caa1/CCC+/B, largely because it offered a 10.75% yield. The deal was led by Deutsche Bank and JP Morgan.
In the Dominican Republic, AES Dominicana, a B- rated electricity company, priced $160m of 10 year non-call five bonds, after offering an 11% yield and a 648bp spread over Treasuries.
Led by ABN Amro, the deal was oversubscribed and traded up in the secondary market from par to 100.25 bid.
Just as surprising was investors' strong response to a $200m five year bond by Telecom Personal, the wireless telecom subsidiary of Telef—nica Argentina. JP Morgan marketed the bond in the US this week and is due to price it next week.
"Investors are taking one of two views as the year-end approaches and they close their books," said one banker in London. "They either want to park money in safe assets within the emerging market asset class, or they want to turbo-charge portfolios to boost 2005 returns. That's why we're seeing such a strong bid for high-yielding corporates and sovereigns in December."
Ecuador and AES Dominicana offered investors what is becoming a rare chance to buy an emerging market bond with a pick-up. Spreads have tightened so much that much emerging market paper is now trading inside comparably-rated US bonds.
With funds still pouring in to the emerging markets and an expected decline in new issuance next year, investors were willing to turn a blind eye to Ecuador's political volatility and AES Dominicana's erratic customer base, which is prone not to pay bills.
"The yield on the Ecuador bond attracted a lot of investors because they need something with carry and there is nothing like this that they can get in the sovereign market," said an emerging market syndicate manager in New York.
No need for Chavez
The deal attracted about 125 investors, many with orders of $40m-$50m. Venezuela's Hugo Chavez administration also put in its promised bid for $300m of the deal, but it was cut back.
"Venezuela expressed interest for around $200m to $300m," said a source. "They ended up getting bonds but they were not even the largest in the book."
The deal was priced at a deep discount of 91.692 so Ecuador could pay a 9.375% coupon. The bond traded as high as 92.75 during the week.
Proceeds will be used for liability management, more than likely to buy back some of Ecuador's 2012 global bonds. The 2012s have a 12% yield and Ecuador wants to lower its debt costs before next year's presidential elections.
The republic tried to issue in April but had to shelve the deal after political turmoil led to the ousting of President Lucio GutiŽrrez.
At a yield of 10.75% the deal came about flat to Ecuador's 2030s, once the call option on the longer-dated bond is taken into account.
"It was a great deal for investors," said one head of Latin American debt capital markets not involved in the trade. "It was priced to sell and if you want to own Ecuador — and I am sure out of the billions of dollars of inflows into emerging markets some people need Ecuador because it's in the index — it is probably the best bond to buy on Ecuador's curve."
Pricing above the parent
AES Dominicana, based in the Dominican Republic, which has only just gone through a sovereign debt restructuring and is infamous for its electricity blackouts, succeeded in issuing in this week's bullish market by pricing its $160m 10 year non-call five deal attractively, compared with other bonds from Latin American subsidiaries of its parent, the US company AES Corp.
Electricidad de Caracas (EDC) and Colombia's AES Chivor both have 10 year non-call five bonds maturing in 2014 trading at yields of 9.02% and 8.33%.
On a yield basis EDC trades about 173bp above the Venezuela 2014s and AES Chivor at about 166bp above the Colombian 2014s.
AES Dominicana's yield is about 270bp higher than the Dominican Republic's 2018s.
Managers from Argentina's Telecom Personal went on the road in the US this week and attracted a strong reception from investors for its $200m five year bond, led by JP Morgan.
The wireless subsidiary of Telef—nica Argentina is rated B- by Standard & Poor's and Fitch, with a stable outlook. The deal is part of, and conditional upon, Telecom Personal being able to raise a total of $380m in the local and international bond markets and with an internationally syndicated loan.
The local bond will be the Argentine peso equivalent of $50m, split into a one year fixed rate tranche and a three year amortising floater.
The loan, one of just a handful that international banks have extended to Argentine borrowers this year, will be up to $130m. It will include an 18 month tranche at 200bp over Libor and a two year tranche at 225bp over Libor.
All three parts are to be priced and closed in the next week, sources say.
Grupo Ultra, a Brazilian petrochemical company, is also due to price a dollar bond, led by Morgan Stanley and Santander, in the week ahead.