Peru prints $3bn in sol-denominated notes

Peru prints $3bn in sol-denominated notes

Bonds Debt Capital Markets Corporate & Sovereign Strategy Fixed Income Peru

Peru said it has printed PEN10.4bn ($3.06bn) in sol-denominated notes, marking the largest debt sale in local currency from an emerging economy.

The Euroclearable bonds set a new benchmark for Peru and reopen the international capital markets for Latin American issuers to sell debt in local currencies, the ministry of economy and finance said in a statement.

The bookrunners JPMorgan, Morgan Stanley, Santander and Scotiabank opened the pricing at 6.125%, but strong demand brought the yield down to 5.95%, the ministry said. Foreign investors took 65% to 70% of the bonds, while local buyers got the rest.

Peru had planned to issue between $1bn and $2bn in cross-border bonds earlier this month, but political commotion at home and choppy markets abroad convinced it to postpone the deal. A rally in Peru's bond prices in the secondary market, however, convinced the sovereign issuers to make its move, sources told LatinFinance.

"The deal was upsized and offered to both local and international investors like asset managers and Peruvian institutions interested in benefiting from a strong trading curve," said a source involved in the transaction.

Despite all the political tumult — the country is gearing up for a referendum on constitutional reforms on December 9, the opposition leader, Keiko Fujimori, was arrested on money laundering charges in late October, and a former president, Alan García, is seeking asylum — Peru took advantage of strong investor appetite to print the massive deal before the market came to a halt closer to the end of the year, said Oscar Jasaui, head of the local ratings agency Pacific Credit Rating (PCR).

"You can't have an open window forever," Jasaui said. "Peru has a very good profile among emerging markets with interesting dynamics and prospects."

Peru has used part of the money it raised to buy back $246m of its 7.125% 2019 bonds, along with PEN2.53bn of 7.84% 2020s, PEN1.61bn of 6% 2029s and PEN48.9m of global depositary notes due in 2020. The rest of the proceeds will go to reduce the budget deficit next year.