Chile

Empresas CMPC, the Chilean pulp and paper producer, priced a sustainability-linked bond inside its curve on Wednesday, leaving no doubt that Latin American issuers can still garner a material pricing benefit from ESG debt, even as emerging market bonds feel the pressure from US Treasury volatility.

Chile’s head of international finance said that the sovereign’s debut in the Formosa bond market this week was a natural continuation of the diversification of its funding sources, as Asian investors bought more than half of the government’s $1.5bn 32-year sustainable bond. The government has now issued green, social and sustainable notes in international markets.

Just over two months after it last issued internationally, Chile returned to primary markets on Tuesday with a sustainable Formosa bond. The deal was the second ever Formosa from a Latin American sovereign and comes as Chile makes efforts to diversify its funding sources.

Empresas CMPC, the Chilean pulp and paper producer, began investor meetings on Monday ahead of a proposed sustainability-linked bond (SLB) that investors say is likely to attract strong demand as long as the volatility seen in rates market on Monday does not worsen.

Chilean cable company VTR brought life to the Latin America primary bond market on Wednesday, but the company was unable to tighten its new senior-secured eight-year deal beyond guidance as markets are remaining functional but cautious in the face of rising US Treasury yields, said bankers.

Banco Santander Chile sold its first ESG-themed bond on Tuesday, raising $50m in a private placement with a Japanese investor to finance small and medium sized enterprises led by women.

Emerging markets issuers across CEEMEA and Latin America once again triumphed in primary bond markets this week, with several sovereigns and corporates notching record low costs of funding. But there are signs that the direction of US rates is playing on investors’ minds, write Mariam Meskin and Oliver West.

Chile tapped bond markets for $4.25bn-equivalent of funding on Tuesday, starting with a 10 year green tap and new long-dated social bond in euros, and then following a similar playbook in US dollars.

Chile is looking to debut its social bond framework in the euro market this week with a 20 or 30 year benchmark. The deal will be accompanied by a re-opening of its 0.83% green bonds maturing in July 2031.

Four heavily oversubscribed Latin American new issues fetched tight pricing on Thursday, dispelling the unease felt at the week’s start and putting the region firmly on track to fulfil the predictions of record primary volumes for a January.

Chilean mobile phone operator WOM began investor calls on Monday ahead of a proposed bond issue of up to $450m.

Despite funding stresses in certain Latin American countries, bond markets will continue to help the region with its financing needs. For now, this eases the pressure for reform and fiscal consolidation, but issuers must eventually face up to political and social turbulence. Oliver West reports.