Latin America Bond: Peru’s US$4bn three-tranche bond

IFR Awards 2020
2 min read
Miluska Berrospi

Braving the storm

Peru pulled off a US$4bn three-tranche deal in November that included its first century bond, printing the notes with their lowest ever yields despite the trade coming in the middle of a period of political turmoil.

In early November the country’s president Martin Vizcarra was impeached and replaced by Manuel Merino. He lasted just five days in the role and was replaced by current president Francisco Sagasti following nationwide protests.

The markets welcomed Sagasti’s appointment and on November 23 Peru seized that window of improved sentiment to raise vital US dollar funding to tackle a budget deficit that was ballooning due to the Covid-19 pandemic.

The buyside showed confidence in Peru’s long-term outlook, swelling order books to around US$16bn across 12, 40 and 100-year tranches with US$5bn of demand for the 2032s, US$6bn for the 2060s and US$5bn for the 2121s.

This came as a surprise to some in the market given the chaotic political backdrop and the fact the country had raised US$3bn in April across five and 10-year paper.

The amount of demand for the debut century bond was particularly surprising, said Lewis Merl, emerging markets debt syndicate associate at BBVA, a bookrunner on the deal alongside Citigroup, Itau, Goldman Sachs and Morgan Stanley.

Still, the level of investor interest enabled the country to achieve some of its lowest ever yields.

Leads tightened pricing 5bp from guidance and around 30bp–35bp inside initial price thoughts, printing a US$1bn 1.862% 2032 bond at 100bp over Treasuries, a US$2bn 2.78% 2060 at 125bp over, and a US$1bn 3.23% 100-year at 170bp.

The 1.862% coupon on the 12-year was in the lowest coupon ever for a US dollar offering from a LatAm sovereign issuer.

The 3.23% coupon on the country’s inaugural 100-year bond is also the lowest ever for a US dollar century bond offering from a sovereign issuer.

The century bond is due on July 28 2121, Peru’s tricentennial anniversary of its independence.

“[The success of the deal] goes to the strength of the credit and how it trades, but also to the work of the banks in putting this in front of people and really pushing and getting accounts to take a good look, and get involved and excited,” said Merl.

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