China – Uruguay draws US$4bn of demand for new US$1.25bn bond offering
By Miluska Berrospi
NEW YORK, May 13 (IFR) – Uruguay entered the market for the first time this year with a new two-part issuance, drawing significant demand on its new 10-year local currency note and tap of its outstanding 4.375% 2031 bond.
The sovereign launched the combined US$1.25bn-equivalent transaction after generating about US$4bn in demand between the two tranches, with interest skewed to the 2031 tap, according to market sources.
Pricing on the new 10-year Ps33bn (US$750m equivalent) 10-year bond tightened to launch at 8.25% from earlier initial price thoughts at mid 8%.
While the US$500m tap launched at Treasuries plus 80bp, from Treasuries plus “very low” 100s, as of Thursday morning.
“Their bonds and curves are tight as is,” said a LatAm syndicate banker following the deal.
“[It is] not surprising the tap went a bit better as it was likely supported more by international accounts,” he said.
Uruguay’s outstanding 2031 bond was trading at a price of 116.00 to yield 2.36%, as of Thursday afternoon, according to Refinitiv data.
The note traded at a spread of Treasuries plus 68.7bp as of Wednesday’s close, the Refinitiv data showed, giving investors in Thursday’s deal a pick-up over the outstanding notes.
Uruguay, rated Baa2/BBB/BBB-, is considered a solid name in the region with inflation levels declining, strong liquidity buffers in the form of US$1.7bn credit lines with multilaterals, and the second highest Covid-19 vaccination rates following Chile.
Strong credit metrics has led to robust demand for the country’s local currency debt, the country’s head of debt management Herman Kamil told IFR earlier this week.
“Our focus is on our local-currency issuance. Local currency has sustained growing relevance by institutional investors,” said Kamil ahead of Thursday’s issuance.
Uruguay was in the market last June 2020 with a local currency inflation-linked 20-year note, which was met with robust demand. Before that, it was also in the market with a local currency issuance in June 2017 when it sold a new 9.875% 2022 bond.
Proceeds of Thursday’s offering will go toward funding COVID-19 related governmental measures with the goal of supporting economic activity and protecting certain economic sectors.
Funds will also be allocated toward refinancing or retiring government liabilities.
(Reporting by Miluska Berrospi; Editing by David Bell)
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