The Republic of Peru issued the
longest dated Latin American deal so far this year with a $1bn
retap of its 2025 bonds this week, in order to finance an early
repayment of Paris Club debt.
Peru, rated BBB-/Ba1, announced the re-opening of the 7.35%
notes on Monday morning, through leads UBS and JP Morgan. The
issuer retapped its 7.35% SEC-registered notes at 103.827 to
yield 6.95%, or 343.6bp.
Bankers on the deal sent out pricing guidance in the 7% area,
representing a 32bp concession given the trading levels of the
2025s. The bonds were first issued for $750m in July 2005 and
re-opened for a further $500m that December.
The deal attracted $4.7bn of demand, which allowed the leaders
to price tightly: the re-opening concession stands around 27bp,
said bankers close to the deal. Analysts say the 2019s sold in
March Perus first external bond issue in two years
would have been easier to tap due to the shorter
maturity date and greater secondary market liquidity. However,
leads say the 2025s were chosen as this bond was launched
specifically to repay G7 creditors and the strong order book
confirmed investor appetite for the rare investment grade
credit. The proceeds from the debt sale will be used primarily
to repay non-concessional Paris Club loans to France and Italy.
"There was great demand for a great credit that has fared very
well in this crisis," said a banker on the deal. Real money
accounts dominated the order book while 80% of investors were
based in the US and the rest were primarily in Latin
Despite the rarity of Latin sovereign credit, emerging market
issuers have found it nigh on impossible to issue long dated
bonds. In February, Mexico was forced to scrap the 21 year
tranche of its bond issue and instead issued a five year $1.5bn
benchmark. This event disheartened Latin American markets by
highlighting the divide between prolific US high-grade
borrowers and emerging sovereigns deprived of market access for
new long-dated paper.
As a result, market players have seized on this weeks
issue to hail the markets hospitality for high quality
issuers. "Until this week, no issuer really tested the long end
of the yield curve so its a big positive that the deal
attracted so much demand," said a Latin American debt syndicate
official in New York.
In recent years, Peru has carried out a flurry of active
liability management programmes, significantly reduced its
indebtedness, strategically extended its maturities and boosted
liquidity in its yield curve. It is one of the few countries in
the world expected to grow this year with the IMF forecasting a