Corporate High-Yield Bond of the Year: Tecpetrol

Corporate High-Yield Bond of the Year: Tecpetrol

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Tecpetrol took advantage of strong US demand for Argentine paper and strong operational performance to raise $500 million through unsecured notes at 4.875%, which priced quite competitively compared to fellow high-yield issuers. The notes are due in 2022.

Bookrunners BBVA, Citi, JPMorgan and Santander led the deal, which was more than five times oversubscribed, tallying some $2.6 billion in offers.

The high demand, much of which came from the US, enabled leads to launch the deal at 4.875%, well below the 5.5% initial price talks and 5.185% at guidance.

Moody's gave the company a first-time Ba3 rating, while Fitch Ratings ranked the paper BB+. The ratings agencies cited Tecpetrol’s diversified and stable business model, with a geographic footprint of oil and gas throughout Latin America, as well its "predictable" cash flow generated from businesses outside of Argentina, in Peru, Colombia and Mexico.

The issue also hit the market a couple of months after the company successfully initiated production at the Fortin de Piedra gas block, which accounted for 10% of Argentina’s gas production as of September last year, according to Tecpetrol chief executive Carlos Ormachea.

The offering may have also benefitted from election results that favored President Mauricio Macri’s investor-firendly agenda.

As part of its 2017-2020 plan, Tecpetrol had announced plans to invest $2.3 billion during the time period to produce an average 14m cm3/day in the Vaca Muerta region in Argentina. The company’s Fortin de Piedra block has already reached 17.5 cm3/day in December, according to Perfil.