Argentina prints century bond
June 19, 2017 |
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 LatinFinance.
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 Mexico’s 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 2027 bonds in January and then went to the Swiss market in March, printing CHF400m ($403m) in 3.5-year paper.