Codelco placed US$2 billion in bonds at lowest rate obtained by a Latin American issuer ever
11-Jul-2012 El Mercurio – News
Institutional investors oversubscribed in five times the bonds issuance made by Chilean state-owned company:
Codelco placed US$2 billion in bonds at lowest rate obtained by a Latin American issuer ever
Sources from the state-owned mining company assure the successful issuance is a demonstration that the international financial market considers Chile a reliable partner and it is also a recognition to the business development boosted by the state-owned company
The cheapest interest rate obtained ever by a Latin American corporate or sovereign issuer was achieved by Codelco in Wall Street yesterday during the placement of two bonds totaling US$ 2 billion.
The state-owned mining company issued its debt in two bonds. One 10-year bond for US$1,250 million at a nominal yield or coupon rate of 3% with an extra-yield of 3.157% , and a 30-year bond for US$750 million at a coupon rate of 4.25% with 4.398% yield.
“It has never been, ever, any Latin American issuer, sovereign or corporate, who has ever got these conditions”, these were the words of José Antonio Álvarez, Finance Manager of Codelco, who commented these results from New York yesterday.
As a reference, last year, Chilean Treasury placed debt in US market at a record rate for a country of this region, however it only reached 3.35%.
Álvarez reported that Codelco issuance was oversubscribed in five times thus exceeding US$10 billion in a highly unpredictable market ensued from the European markets situation.
The executive recalled that last Monday the Mexican América Móvil placed the same amount of resources but with two differences: Higher interest rates to obtain capital and it was only three-fold oversubscribed.
Country reliability
It is his opinion that unprecedented conditions under which Codelco negotiated its bonds issuance confirm Chile is considered a reliable country by international financial markets. “Codelco is 100% owned by the State of Chile and consequently when you refer to Codelco somehow you are also referring to the State of Chile and reliability is of highest importance”. Álvarez added that low rates are also a sign of the trust investors have on the state-owned company business development project.
Certainly, these resources are fully assigned to fund part of 2012-2013 investment plan of the company that is mainly aimed at extending in 50-75 years the useful life of operating assets of Codelco .
These challenges include, amongst others, development of new level at El Teniente mine, underground operation of Chuquicamata, Andina Expansion, Ministro Hales development, and Radomiro Tomic Sulphides operation.
José Antonio Álvarez noticed the favorable scenario that opens up to Chilean companies to issue debt bonds at lower capital cost. “It may be said Codelco is a benchmark for Chilean corporate bonds. What I can certainly observe here is an important opportunity for quality Chilean companies to have access to international markets and improve cash-flow for their investment projects”, he asserted.
