NEW YORK, Sept 29 (IFR) - Three more Latin American issuers
hit the bond market on Thursday at the end of a busy week for
the region after higher oil prices helped bolster sentiment
toward the asset class.
Mexican retailer Liverpool, financial institution Banorte
and Brazilian fuel distributor Ultrapar added another US$2bn in
supply, bringing this week's tally so far to just over US$4bn.
This follows bond sales from the Republic of Peru,
Votorantim Cimentos, AES Panama and Ecuador, with volumes likely
to rise further if Argentina prints its euro bond on Friday.
While investors are cautious heading into the fourth quarter
as they look to hold onto strong gains in EM this year, the bid
for primary issues remained healthy on Thursday after OPEC's
decision to cut output sent crude higher.
"Overall for EM the sentiment is good on a day when oil goes
higher," said a London-based investor.
A 10-year bond from Liverpool, rated BBB+/BBB+, gained
strong momentum earlier on, allowing leads to tighten guidance
from IPTs of T+275bp area to T+250bp (plus/minus 5bp).
Investors like the credit - which hasn't been in the market
since 2014 - even at a time when volatility in the peso could
potentially hurt local currency revenue generators like
Liverpool that are raising dollar debt.
"It is a big company with low leverage," said Jason
Trujillo, a senior analyst at Invesco. "They can handle the
Liverpool will hedge this bond against FX fluctuations, just
as it did with its last issue, according to Fitch.
The company has been on an acquisition spree, however. It
recently agreed to buy Suburbia from Wal-Mart de Mexico for
close to US$1bn equivalent, while also bidding for Chilean
retailer Ripley in a deal that some analysts think is expensive
for the Mexican company.
Both those acquisitions could push adjusted leverage to 2.6x
next year, up from the 1.2x in June 2016, according to Fitch.
Despite that, at final launch yield of T+245bp, Trujillo
thinks the US$750m deal comes flat or little inside fair value
to its curve, where the company's 2024s are trading at a
Z-spread of 226bp.
Even so, the final yield looks attractive against Chilean
department store Falabella, which is rated BBB+ and has a 4.375%
2025 trading at 3.39-3.34%, according to Thomson Reuters data.
Mexican bank Banorte meanwhile approached investors with
US$500m 15-year non-call 10 subordinated capital note on a tough
day for bank stocks as investors fretted about the declining
health of Deutsche Bank.
Indeed, leads stopped short of tightening the deal to the
lower end of the guidance range of 6% (plus/minus 5bp) and stuck
to 6% at launch.
The final yield is about 194bp over where Trujillo
calculates a senior 10-year deal from Banorte would come,
putting it well above the 100bp plus spread differential
typically seen between senior and sub bonds in EM.
"They are offering a concession, but it is necessary given
the lack of clear comparables," he said.
Elsewhere, Ultrapar, rated Ba1/BB+, launched a US$750m
10-year at 5.50%, after reeling in pricing from IPTs of high 5%.
At those levels, final pricing is inside what one investor
thought was fair value of 5.6% after he compared it to
bioethanol company Cosan and petrochemical name Braskem, whose
2024s and 2027s were respectively trading at 5.85% and 5%.
Ultrapar also came tight to where Brazil's Votorantim
Cimentos (Ba2/BB+/BBB-) printed earlier in the week when it sold
a US$500m 2027 bond with a 6% yield.
"Ultrapar is a great company," said a senior banker away
from the deal. "Relative to their financial strength they are
paying up a bit. It is just not as well known as some of the
more frequent names."
(Reporting By Paul Kilby; Editing by Shankar Ramakrishnan)