Enel Chile fires up LatAm with tight 10-year

Enel Chile fires up LatAm with tight 10-year

Capital Markets Debt Bonds Chile

Enel Chile drew roughly $3bn in orders ahead of pricing a $1bn June 2028 bond on Thursday, injecting impetus into an otherwise slow LatAm corporate market.

After completing a scheduled and publicized roadshow on Wednesday, the power utility on Thursday morning announced initial price talk (IPT) in the 230bp area over US Treasuries, DCM bankers confirmed.

Enel's new issue was expected to be isolated from the bulk of volatility that has quietened the cross-border space of late. Unlike its neighbors, Chile has little political volatility and no upcoming elections. As a tried and tested utility, Enel also provides that general safe bet for investors.

"They have generation [power], distribution, green energy and considerable cash flow and can fund capex with cash," a banker with one of the bookrunners said.

Today's conditions being somewhat of a "new normal," Enel's early price talk was widely considered fair value by four sources who spoke to LatinFinance.

"Pricing is spot on," one DCM banker said yesterday afternoon. "Given conditions, this deal is easier to price... It is Chile, so it is unrelated to volatility and it is a safe bet. A utility."

Leads welcomed between $2.5bn and $3bn in orders at the transaction's peak and promptly tightened guidance to 215bp over Treasuries. The deal launched on the tight end of guidance, while final orders rounded out at roughly $2bn to $2.5bn, three of the four sources confirmed.

Those monitoring the trade looked at a variety of securities from Enersis, Enel, Chilean utility Colbun and even less-liquid paper from AES Gener.

"I think this is fair and 200bp would have everyone happy," the second of the four sources said of guidance. "If you feel it is a better credit than Colbun, then maybe fair value is 195bp over Treasuries."

On Thursday, Colbun's 2024s were about 165bp, while Enel's own 2024s were sitting between 155bp and 160bp in secondary markets, sources added.

Bookrunners priced the new issue at 210bp over US Treasuries with a 4.875% coupon to yield 5.026%, or a reoffer value of 98.824. Moody's rated the bond Baa2 and S&P Global Ratings gave it a BBB+.

The former rating agency said in a report that Enel Chile held a "leading position" in local energy distribution and generation markets with contracted prices "substantially above system marginal costs."

Sources inconclusively considered the new issue concession at 10bp.

Enel's new paper also offered a fair pick-up over Chile's sovereign bonds. Sources said the country's 10-year was roughly 90bp over Treasuries on Thursday.

"It is hard to find real fair value given the wider conditions," the third of four sources added. "But this deal might be a little bit more insulated from what is going on [in the market]."

Market observers deemed Enel an ideal credit under current circumstances and said the climate was not suited for unknown issuers or those companies with untried and untested structures.

As a Chilean credit, Enel was able to foster greater security from the investor community. Politically, Chile's election last year was a boon for the buyside, unlike the concerns simmering in Brazil and Mexico, ahead of their presidential elections in October and July, respectively.

Last year, business-friendly candidate Sebastian Pinera won the Chilean vote.

BBVA, Citi, JPMorgan, Morgan Stanley, Santander and Scotiabank led the trade. Winston & Strawn was legal advisor to Enel Chile, the law firm said in a statement. Carey y Cia was local counsel to the power company, while Cravath, Swaine & Moore was international lawyers to the underwriters. Alessandri y Cia was local counsel to the banks and Emmet, Marvin & Martin advised the trustee.

Proceeds will aid the company's hefty acquisition plans throughout the region.

M&A spree

Italian parent Enel has been ramping up its collection of assets in Latin America. Earlier this month it bid BRL5.5bn ($1.45bn) for a controlling stake in Brazilian power distributor Eletropaulo and is expected to pen an 18-month bridge loan to help pay for the target company.

In April, Enel Chile wrapped up a multi-faceted reorganization that incorporated transactions across the equity and syndicated loan markets. The reorganization saw Enel Chile consolidate its Italian parent's conventional and non-conventional renewable energy generation business in Chile, along with its energy distribution business in the Andean nation.

The change also incorporated the merger of Enel Green Power LatAm with Enel Chile.

Back in February, Enel Chile got an 18-month $2bn loan from six banks to pick up an additional 24.2% stake in Enel Generacion Chile. Five of the six worked on Thursday's bond sale.

Enel Generacion, then known as Endesa, sold $400m in 2024s back in April 2014.

Enel Americas, which manages Enel's businesses in Argentina, Brazil, Colombia and Peru, printed $750m in 2026s back in 2016. It also signed a three-year $500m loan in March.

The Italian utility owns 62% of Enel Chile, the largest generator in Chile with 28% market share. Parent Enel first approved the restructure of its LatAm operations in November 2015.