Latin America heats up again with new deals; Santander Chile, Banco Cruzeiro, Brazil price

By Christine Van Dusen

Atlanta, Sept. 15 - Latin America renewed its status as a hot zone on Wednesday with several new bond issues pricing and strong street flows for corporates and sovereigns.

Among the deals to come to market during the day was financial services company subsidiary Banco Santander Chile's three-tranche issue of notes totaling $1.2 billion in a Rule 144A and Regulation S transaction via Deutsche Bank, JPMorgan and Santander, a market source said.

The $500 million tranche of 3¾% fixed-rate notes due 2015 priced at 99.716 to yield 3.813%. The Chilean peso-denominated, $500 million-equivalent tranche of 6½% 10-year global notes priced at par to yield 6½%. And the $200 million floating-rate notes due 2011 priced at a spread of 100 basis points over Libor.

Proceeds will be used for general corporate purposes, mainly to fund lending activities.

Also on Wednesday, Brazil-based lender Banco Cruzeiro do Sul SA priced $400 million 8 7/8% notes due 2020 at 99.187 to yield 9% with Barclays, BCP Securities and UBS in a Rule 144A and Regulation S offering, a market source said.

Talk was set at the 9¼% area.

Proceeds will be used for general corporate purposes and to increase the company's capital base for credit portfolio growth.

And the Federative Republic of Brazil - which just the day before added on $500 million to its 5 5/8% notes due 2041 - added on to the $1.775 billion yet again, this time with $50 million pricing at 106.407 to yield 5.202% via ItauBBA and HSBC in a Securities and Exchange Commission-registered deal.

Recent issues fare well

A market source said Wednesday was a "very strong and firm" day with "good support from the equity markets," with sovereign paper "very much better bid across the board."

In this environment, Brazil's add-on from the prior day was doing "very well" at early afternoon, the source said. "It's trading at 107 to 1071/4," he said.

And though the deal came as a surprise to many in the market - "there weren't any rumblings of that at all," he said - it made sense. "The sovereigns are just taking advantage of lower rates."

Also getting attention on Wednesday was the new $400 million 5% notes due 2021 from Chile-based wood pulp and forestry company Celulosa Arauco y Constitucion SA, which priced at 99.093 to yield 5.115%, or Treasuries plus 245 bps.

With the company's existing 2019 bonds trading "at a mid-dollar price of around $115, the high dollar price may have suppressed demand for the notes," according to a Barclays Capital research report. "So, while pricing on the deal appears aggressive in giving only a few basis points of concession for the added duration, we believe the issue will do relatively well and may provide opportunity for investors to get involved in the name at a lower dollar price."

LatAm names trade up

Overall, Latin American corporates and sovereigns saw "huge street flows" on Wednesday that were "the strongest since the end of summer," a trader said.

Spreads tightened across the board between 5 bps and 8 bps, he said.

Argentina, Brazil, Mexico and Venezuela were higher by "½ to 1¼ point," he said.

"Little profit taking was seen into the close," he said, "signaling a yet stronger open tomorrow."

Brazil-based paper and pulp company Fibria Overseas Finance Ltd. saw its 7½% notes due 2020 - which priced at 99.136 to yield 7 5/8%, or Treasuries plus 389 bps - trade "up 1 point on the day," he said.

Asia in focus

Another new deal that has fared well was the $350 million notes due 2015 from Hong Kong-based toll road and property company Road King Infrastructure Ltd., which priced at par to yield 9½% via DBS and JPMorgan in a Regulation S-only deal.

The final book was $2.2 billion from 178 orders, a source said.

Asia accounted for 84%, Europe for 12% and others for 4%, with asset and fund managers at 59%, private banks at 26%, banks at 12% and others at 3%.

In other news from Asia Wednesday, Seoul-based state-owned financial company Korea Finance Corp. priced $750 million 3¼% notes due Sept. 20, 2016 at 99.876 to yield 3.273%, or Treasuries plus 182.5 bps, a market source said.

Barclays Capital, BNP Paribas, Citigroup, Credit Suisse and Korea Development Bank were the bookrunners for the SEC-registered deal.

Proceeds will be used for general operations, including extending foreign currency loans.

CSN, Morocco on tap

Set to price on Thursday is the $1 billion perpetual notes from steel production company subsidiary CSN Islands XII Corp. via Bank of America Merrill Lynch, Credit Suisse, Deutsche Bank and Morgan Stanley. The Rule 144A and Regulation S deal was whispered with a yield in the high 7% area before talk was revised to 7% to 7¼%.

"There's $8 billion in the books," a market source said. "It will be benchmark in size, but that hasn't been announced yet. It will price during New York hours."

Also coming up is a euro-denominated benchmark-sized offering of notes from Morocco, which on Wednesday mandated Barclays Capital, HSBC and Natixis as bookrunners for a Regulation S deal. The notes will be marketed on a roadshow in Europe and the Middle East starting Sept. 20 and is expected to price soon after, pending market conditions.

Mexico, Votorantim plan deals

Another issuer marketing a deal is Mexico, which tapped Nomura, Mitsubishi UFJ and Mizuho Securities for $1.8 billion-equivalent of samurai bonds, a market source said.

The ¥150 billion deal is expected to come to market in October and will be guaranteed by the Japan Bank for International Cooperation.

Wednesday also saw Brazilian conglomerate Votorantim Participacoes SA mandate Deutsche Bank, HSBC and SG CIB for a roadshow in Europe starting Sept. 20, a market source said.

And market-watchers were whispering about a possible issue of as much as $6 billion in bonds this year from state-owned oil company Petroleos Mexicanos SAB de CV, as well as a potential eurobond issue of notes from Ukraine this month.

The sovereign had recently canceled a planned issue of notes given "other immediate sources of financing and its liquidity position," the Ukraine Ministry of Finance had said in a statement.

Primary market activity in general is "bound to pick up across the next week or so," a market source said. "We'll see a couple more Brazilian banks, and Asia is going to pick up again."

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