Market welcomes Colombia's return as investors pile into two-part offering

Market welcomes Colombia's return as investors pile into two-part offering

Capital Markets Bonds Colombia

Investors welcomed Colombia's return to the debt capital markets on Wednesday, piling into an order book that swelled to some $8bn, according to four sources that spoke to LatinFinance.

Colombia, buoyed by higher oil prices and the strong secondary performance of its existing bonds, opened with initial price talk of 165bp over US Treasuries on a new long 10-year bond that is set to mature in 2029.

By late morning on Wednesday, sources said orders were already well over $4bn, prompting the sovereign issuer to ponder a tap of its 2045s.

Leads set guidance on a tap in the 190bp area over Treasuries, while guidance on the new issue was set between 140bp and 145bp, sources said.

"Colombia has been isolated from a lot of the political noise in Mexico and Brazil, and its 2027s have tightened recently," one syndicate banker monitoring the deal said.

Ba2/BBB-/BBB rated Colombia's 2027 bond was spotted at 124bp on Wednesday morning, 30bp tighter from roughly one year ago, two DCM bankers said.

The 2045s have come in almost 40bp since the start of June, when they were spotted at 216bp over Treasuries, a third DCM banker not involved in the deal said. On Tuesday, the longer-dated securities were as tight as 182bp, compared to 216bp in June and 200bp earlier this month.

Leads then launched a $1.5bn transaction for the 2029 note at 140bp and announced a $500m reopening of the 2045 note at 185bp.

Bankers estimated the new issue concession between 5bp and 10bp while two bankers agreed that 7bp to 8bp was a fair measurement for the difference in maturity between Colombia's existing 2027s and a new 2029 note.

"Investors have a lot of money to put to work and Colombia's timing works considering we have not seen a sovereign since July," the DCM banker said. The Dominican Republic in July was the last LatAm sovereign to sell dollar debt.

Buy- and sell-side sources have expected Andean credits to prop up the primary marketplace over the last two months due to political noise in Mexico and Brazil leaving very few names from the two larger economies open to new bond sales.

"We have got a lot of inquiries about Colombia of late," the syndicate banker said. "It is a great place to pick up exposure to the region without the volatility."

And the dearth of new issuance in recent months meant Colombia was able to tap into an attentive investor base hungry for new paper.

"There has not been anything in months so if you want emerging market exposure, Colombia is perfect because they never come to market more than once or twice a year," the fourth banker said.

Colombia's lower credit rating, compared to neighbors Chile and Peru, also gives bond buyers a chance for a bit more yield when compared to its sovereign investment grade peers.

"In terms of Andean risk, there is a chance [with Colombia] to pick up a bit more juice compared to neighboring sovereigns," the fourth source added.

Leads priced the March 2029 bond with a 4.5% coupon to yield 4.578% or a reoffer price of 99.362. The 5% 2045 tap priced at a yield of 5.184% or a reoffer price of 97.350.

Colombia last visited the cross-border market in August 2017, adding $1.4bn to its 3.875% 2027s. Bank of America Merrill Lynch, HSBC and Deutsche Bank coordinated the transaction.

Tender offer

Colombia also announced on Wednesday an offer to purchase its outstanding 7.375% 2019 bonds. The sovereign issuer has $2bn in outstanding 2019s and was offering noteholders $1,021.25 for every $1,000 in principal.

Citi, Credit Suisse and JPMorgan coordinated the new 2029 issuance, 2045 retap and also served as dealer managers on the tender offer, Colombia said in a statement.


Photo by Wikipedia