Colombian issuance restarts with Ecopetrol jumbo

Colombian issuance restarts with Ecopetrol jumbo

Ecopetrol, on a fundraising spree to finance an ambitious investment program, has reopened the Colombian bond market with the largest domestic transaction in three years.

The state-controlled oil producer sold 900 billion pesos ($464 million) in bonds Tuesday. The deal was split across four tranches, with tenors ranging from five to 30 years.

Proceeds from the sale will help fund Ecopetrol’s extensive capex program. The company spent $31 billion on capex between 2008 and 2012, and plans to invest $75 billion in the next seven years.

Ecopetrol, which is 88.5% owned by the Colombian government, plans to fund three-quarters of that capex program through retained profits. It plans to allocate nearly $7 billion of equity capital and around $12 billion of debt funding to capex between 2013 and 2020.

Already this year, the company has raised $847 million from a syndicate of international lenders in a deal guaranteed by the US Ex-Im bank, as well as 1.84 trillion pesos through a loan from domestic banks.

More Colombian paper expected

Investors placed around 1.9 trillion of orders for Tuesday’s bond deal, which is the first sale in the local market since May. The bond issue is also the largest in the Colombian market since Ecopetrol’s last deal in 2010, which was 1 trillion pesos.

The deal may kick-start more issuance, bankers say. Local market bond sales waned after Colombian bank Banco de Occidente sold a 253 billion peso transaction in May. Since then, several borrowers have been waiting for a chance to issue bonds after volatility increased when the US Federal Reserve began discussing an end to its program of quantitative easing.

Ecopetrol is also eying the opportunity to tap international investors. It starts a five-day non-deal roadshow next week, starting meetings in Singapore on September 2. The company will also visit investors in Hong Kong, Europe, Latin America and the US.

Ecopetrol has not sold international bonds since its $1.5bn international debut in 2009.

Ecopetrol reported Ebitda of 15 trillion pesos on an unconsolidated basis in the first half of 2012. That was a 6.2% fall from the same period the previous year. LF