Chile sells bonds for coronavirus response

Chile sells bonds for coronavirus response

Asset Management Bonds Debt Capital Markets Corporate & Sovereign Strategy Economy & Policy Fixed Income Funds Coronavirus Chile Andean Latin America US

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Chile said it raised $2 billion in a two-part bond sale on Tuesday, raising money to fund part of its emergency relief efforts to fight the coronavirus pandemic.

The sovereign, in a statement, said it sold $1.458 billion in new 2031 notes and added €500 million ($542 million) to its 1.625% 2025 euro-denominated bonds with order books that were "well supported," said a source involved in the deal. 

According to the government and market sources, the new long 10-year notes priced at 99.958 with a coupon of 2.45% to yield 2.454% or 180 basis points over benchmark US Treasuries. The reopening of the 2025 bonds priced at 102.098 to yield 1.165%, or 150 basis points over mid-swaps. Chile is scheduled to settle the notes on May 12.

Chile opened initial price talk for the dollar-denominated notes around 225 basis points over US Treasury bonds, before it set guidance at 185 basis points, plus or minus five points, and launched at 180 basis points, said another source involved in the deal.

For the 2025 tap, the initial price talk started around 195 basis points over mid-swaps, guidance was set at 170 basis points, plus or minus five points, and the deal launched at 150 basis points, the source added.

Citi, Itaú and Scotiabank were the joint bookrunners on the deal. Legal advisers were Cleary, Gottlieb, Steen & Hamilton, and the local law firm Morales y Besa, the government said.

Chile's Finance Ministry said the new 2031 bonds were 5.7 times oversubscribed with $8.24 billion in orders from more than 250 accounts and the 2025 bonds were seven times oversubscribed with €3.5 billion in orders from more than 190 accounts.

"In fact, this is the only euro-denominated sovereign bond by a country not on the European continent since March 1," the ministry said in a press release.

It added that it will use the money to fund programs to support the economy during the COVID-19 pandemic. The government has announced a series of measures designed to lessen the economic impact of the coronavirus, including a $3 billion guarantee fund for small businesses. 

But at the end of January, after issuing $1.65 billion and €1.96 billion in green bonds, Andrés Pérez Morales, head of international finance at the Finance Ministry, told LatinFinance that Chile had completed its fundraising plans in foreign currency for the year.

Fitch Ratings cast a negative outlook on Chile's ratings in mid-March due to lower growth prospects and higher debt levels following the social unrest that began in October last year.​

On Tuesday, Chile's 10-year bonds yielded 2.64% on the government benchmark curve, according to data provider Refinitiv.