January 17, 2018 | Peter Agra
In an effort to reduce dollar debt, Peru explored the Euroclear market and international investors lined up
Peru took a step toward shifting its dollar-denominated debt curve to local currency last year by issuing a debut $3.08 billion Euroclearable bond.
The Euroclear format served international investors well, compared to previous global depositary note trades from Peru. Bond buyers were able to shave off some currency costs and get paper that trades freely, rather than through a third party.
Peru faced stiff competition for this award from Chile’s local currency Euroclearable trade. However, Peru’s transaction marked its first Euroclearable security, a move that could lead to significant changes in the sovereign’s debt curve over time.
Bank of America Merrill Lynch, BNP Paribas, HSBC and Scotiabank started price talk in the mid-6% area, before tightening yield to 6.25% at guidance. With order books some three times oversubscribed, bookrunners launched the transaction at 6.15%, before reoffering the notes just shy of par at 99.99.
The deal, also the largest international order book for a sol-denominated issue with 30 billion soles ($9.09 billion), carried only a 3 basis points concession over the country’s local curve at the time.
American investors gobbled 54% of the notes with 29% remaining in Peru; 91% of the debt was bought by asset managers and hedge funds. LF