Argentina prints century bond
Sovereign issuer taps yield-hungry investors to raise $2.5bn in 2117 bonds at 7.125%
Argentina has returned to the cross-border market,
raising $2.5bn from the sale of a 100-year bond.
The bookrunners Citi and HSBC, with Nomura and
Santander as co-managers, priced the 2117 notes to yield 7.125%
on Monday, debt capital markets sources told
The leads set the initial price talk in the 8.25%
area and roped in the yield to 7.917% by guidance. Orders
peaked at roughly $10bn, before the bookrunners offered the
bonds at a cash price of 90, sources said.
Investors based their expectations on
century bond, which was offering a spread of 90bp over a
30-year note, three fixed-income investors said.
Argentina’s new 100-year paper also
compared to the Brazilian energy company Petrobras'
2115 bond, which traded at 7.806% on Monday morning.
Petrobras’ paper has tightened from 8.4% since the
beginning of 2017 to as much as 7.4%.
Despite underachieving on its fiscal targets this
year, investors are giving Argentina the benefit of the doubt
in the new issue market, said Sean Newman, a senior
fixed-income portfolio manager at Invesco.
"Argentina is not being aggressive on reaching
fiscal goals, but investors are confident they will get back on
track," he said.
"Investors also want longer duration securities
with a yield," Newman added. "The pricing is also fair... It
offers 40bp on Petrobras [century bond]."
A bond buyer in London called
Argentina’s new trade "cheap," with investors
getting some compensation in a slow market for new issues.
Longer-dated 2047 paper from
Chile offered 99.841 on June 13, while PetroPeru priced
30-year bonds at par on June 12. Argentina’s
return was a welcome trade for investors with a lot of money to
put to work.
"There is a very healthy level of demand for
sovereign bonds at present," said Alexis De Mones, head of
fixed income at Ashmore Group. "Argentina is clearly trying to
tap into this, as well as low treasury yields at present, to
lock in cheap funding."
Having almost met its $10bn external funding
target for 2017, Argentina is now expected to turn its
attention to currency diversification, with potential trades in
Europe and Japan.
"I would not be surprised if they come back in
other currencies," Newman said. "If they come back again in
dollars, that affects reputation risk."
B3/B/B rated Argentina raised $7bn in 2022 and
bonds in January and then went to the Swiss market in
CHF400m ($403m) in 3.5-year paper.