Jamaica was poised to raise US$2bn through a dual-tranche bond sale on Thursday, adding much-needed supply to what has been a lackluster primary market in Latin America.
The offering, which consists of 2028 and 2045 bonds, saw order books swell to around US$4.5bn as investors took a shine to a deal offering a nice pick-up to the sovereign’s curve.
The healthy demand allowed leads to squeeze pricing on the longer-dated tranche by a good quarter point before launching a US$650m 2045 to yield 7.875%, the tight end of 8% area guidance and inside initial talk of 8.25% area.
Jamaica, Caa2/B/B-, is also set to garner US$1.35bn from the 2028, which was launched at 6.75%, the lower end of 6.75%–6.875% guidance and inside preliminary talk of high 6s–7%.
The decision to load up on the shorter but less expensive tranche made sense as the sovereign is using proceeds in part to retire approximately US$3bn of PetroCaribe debt owed to Venezuela at a steeply discounted price of US$1.5bn.
The liability management transaction is part of the government’s efforts to improve its credit metrics as it undergoes a fiscal adjustment program.
Debt to GDP would have dropped from 136.7% to 126.3% for fiscal year 2014–2015 if the debt had been retired earlier this year, according to an investor presentation.
Seen as an improving credit story, Jamaica has enjoyed recent upgrades from both S&P and Moody’s, which now rate the sovereign at Caa2 (Positive) and B (Stable).
“(International) investors are underweight Jamaica and it has been one of the best performing counties in the EMBIG index over the last few months,” the investor said.
The bond was seen as priced to sell – even after leads pushed yields lower.
At a final yield of 6.75%, the 2028 is offering a approximately 87.5bp of pick-up from where the sovereign’s 7.625% 2025s trade.
It is a similar story with the new 2045, which is being priced some 112.5bp wide to the existing 8% 2039s.
