Chilean state oil company Enap paid up for its $500m bond
issue with a 10 year 5.303% deal on Thursday night. The deal
comes at a difficult time for the borrower, which is saddled
with a high debt burden and plummeting creditworthiness.
Enap, rated A3/BBB-/A, was last in the market in July 2009 with
a 10 year $300m bond. This latest 144A deal, coming soon after
the sovereigns blowout $1.52bn bond last week, came
essentially flat to its 2019s, with the coupon 100bp cheaper
for the issuer compared with the 2019 deal.
However, bankers said Enap
should be compared with its state-owned corporate counterpart,
Codelco. At launch, Enaps 2019 notes offered a 100bp
concession to Codelcos 2019s. By contrast, this
weeks deal offered a 130bp concession over the copper
producer, "which is historically cheap", said a banker not
involved in the deal.
Last week, the Chilean sovereign
issued a $1.52bn bond, split between dollars and pesos,
achieving the lowest ever spread for a Latin American sovereign
at 90bp over US Treasuries. As the Enap deal launched, the
notes were trading at 87bp over. On this basis, the state
backed Enap notes, with its change of control put, offer a
153bp premium. By contrast, Mexicos Pemex and
Brazils Petrobras trade at 130bp and 85bp relative to the
Bank of America Merrill Lynch,
BBVA, BNP Paribas and Scotia Capital were the joint bookrunners
for the sale. A banker on the deal said the 2020s attracted
$4.25bn of demand from over 280 investors with "large
participation from investment grade accounts, driven by the
scarcity of high quality Chilean paper while Enap is an
"I am pretty surprised by the
extent of the concession offered but I guess its a
reflection of all the credit problems the oil company faces,"
said the head of Latin American debt capital markets at a US
firm in New York.
Last week, S&P downgraded
the company to BBB- from BBB, blaming volatile cashflow and
profitability. Moodys has also put a negative outlook on
its A3 rating, citing the companys $3.7bn debt. Fitch
noted on Wednesday that the companys deteriorating credit
metrics could be partially attributed to Februarys
devastating earthquake. "Current debt levels are inconsistent
with Enaps rating without the perception of strong parent
support," the ratings agency noted.
Proceeds from the debt issuance are expected to pay for
short term debt, although total net debt levels will not
change. Over the medium term, the company will maintain a high
leverage for its rating category, with a greater than six times
debt-to-Ebitda ratio, according to Fitch.