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Banco de Chile furthers EM dollar exit with third Swiss bond 0

Jun 28, 2013

Banco de Chile sold its third Swiss franc bond Thursday, raising 125 million francs ($133 million) in a move that extends a shift by Latin borrowers out of the dollar bond market as fears grow over mounting volatility.

"Despite living in a time when the markets have shown a high level of volatility, and where there have been virtually no debt placements, Banco de Chile continues to issue," said Sergio Karlezi, the bank’s treasurer.


The Aa3/A+ rated Banco de Chile priced the 2017 bond at 99.777 with a 1.125% coupon to yield 1.182% or 60 basis points over mid-swaps. BNP Paribas and Deutsche Bank managed the deal.

The bank is the first non-sovereign borrower to tap Swiss francs since the June 19 US Federal Open Markets Committee (FOMC) meeting, when the Federal Reserve signaled an end to its $85 billion monthly quantitative easing (QE) policy, pushing up bond yields.

Earlier this month, Banco de Chile priced a 225 million Swiss franc floating rate note due 2016, to yield 3-month Libor plus 60bp. In May, it added 50 million Swiss francs to its 2018 bond, bringing the size to 250 million francs. It also privately placed a 10-year, 700 million Hong Kong dollar ($90 million) bond in April.

Banco de Chile says it will continue opening new markets, having sold bonds in Hong Kong, Mexico, Peru, Switzerland and the US.

Latin borrowers have raised a record $1.77 billion-equivalent from 10 Swiss franc-denominated transactions this year through June 28, according to Dealogic data. This beats the $1.44 billion from six deals sold in whole of 2012.

Since 2010, issuance in the currency by Latin borrowers has averaged roughly $1 billion, after just a trickle in the preceding years.

"Swiss francs have started to feature on the radar screen of more clients, where in the past we had one or two clients actively following the market," said Sabeen Munir, director for Swiss DCM and responsible for Swiss franc issuance out of Latin America at Credit Suisse.

LatAm represents about 35% of emerging market issuance in Swiss francs so far this year, compared to 20% last year, Munir said. The market remains mostly open for borrowers rated triple-B and up.

Brazil’s Banco Pine, rated Ba3/BB+, indicated plans to raise 100 million Swiss francs earlier this year, but abandoned them in June. But analysts the market could be open for some high-yield borrowers, possibly including Brazil’s Embraer. LF

See also:

Banco de Chile hits Swiss triple

Swiss franc bonds: Taking comfort

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