Ecuador, LatAm Airlines lead primary market surge

Thu May 14, 2015 5:30pm EDT
 
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By Paul Kilby

NEW YORK, May 14 (IFR) - Latin American credit markets enjoyed a rare surge in new issuance on Thursday with Republic of Ecuador and LatAm Airlines raising slightly over US$1.75bn.

Ecuador lured investors early Thursday with a generous new issue premium for its US$750m reopening of 2020s and then used a US$2bn order book to price the bonds tighter than expected.

The oil exporter is paying a final yield of 8.50% on its 2020s which marked a vast improvement on the 10.50% it had achieved when it first sold the bonds at par in March.

It priced the tap at 107.789, coming at a decent discount to 109.50 bid seen on the bonds Wednesday.

LatAm Airlines also priced the region's first ever sale of enhanced equipment trust certificates, raising some US$1.02bn in the process. The bonds backed by aircraft saw demand reach around US$1.45bn.

In the end, the Chilean airline priced a US$845.213m Class A bond due 2029 (A2/A-) at par to yield 4.20%, the tight end of guidance of 4.25% (+/-5bp) and in line with IPTs of 4.125%-4.25%.

A US$175.610m Class B bond (Baa2/BBB-) came at par to yield 4.50%, flat to guidance of 4.5% area (+/-5bp) but the wide end of IPTs of 4.375%-4.5%. Most of demand - about US$1.25bn worth - congregated around the higher rated Class A bond.

Meanwhile, secondary price action was muted in a relatively subdued day in the US Treasury market, where the 10-year benchmark yields were down a touch to around 2.23%.

Bonds issued by E&P name Pacific Rubiales took a tumble, with the 2025s ending about 1.5 points lower at 83.00-84.00 following weak results, said a New York based trader.

The bonds had enjoyed a considerable rally over the last week on news that Mexican conglomerate Alfa and Harbour Energy had made a bid for the company. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)