GO
Loading...

UPDATE 2-Chile places $1.5 billion in bonds at historic yields

Thursday, 25 Oct 2012 | 10:42 PM ET

* Chile has lowest borrowing cost among emerging nations- FinMin

* Bonds could pave way for Chile firms to issue debt

* 10-yr bond issued at 2.38 yield, 30-yr at 3.7 pct

* Revenue destined for debt repayment, sovereign fund

* World No.1 copper producer a Wall Street darling

(Recasts with bond placed, details, Finance Minister quote) Oct 25 (Reuters) - Chile placed $1.5 billion in dollar-denominated bonds on international markets at historic yields, giving the investor-darling the lowest borrowing cost of any emerging country, Finance Minister Felipe Larrain said on Thursday. The 10-year tranche was placed at a 2.38 percent yield while the 30-year tranche was placed at a 3.7 percent yield. Demand for the bond was between six and seven times the amount offered, according to Larrain. Around $840 million garnered from the issue will go to repay debt due in January while the rest is destined for a sovereign fund abroad, thus avoiding pressuring the local peso currency, he added. ``The characteristics of this issue mean Chile today has the lowest financing cost of its history, the lowest cost in Latin America and the lowest financing cost among any emerging country,'' the minister told reporters in Santiago by phone from New York. World No.1 copper producer Chile has long been a favorite among international investors, thanks to the country's market-friendly policy mix, robust economy and political stability. The government's issue is also seen paving the way for Chilean corporate issuers to tap debt markets. Chile's yield compares with the then-record low 2.686 percent achieved by Brazil when the South American giant sold $1.25 billion of dollar-denominated 2023 bonds early last month. Neighbor Bolivia returned to global credit markets for the first time in nearly a century on Monday, selling $500 million worth of 10-year bonds in a sign of investor confidence in South America's poorest nation. The sale comes as Chile's economic growth is expected to ease to 4.8 percent next year, hampered by global turbulence and down slightly from an upwardly revised 5 percent estimate for 2012, the government said earlier this month.

``Chile's sovereign ratings are supported by years of prudent fiscal management, an effective and credible monetary regime anchored by a freely floating currency, and an economic model based on competitive markets,'' said Fitch in a report on the bonds, which it rated 'A+'. ``These strengths counterbalance high commodity dependence, low per capita income and human development indicators that are weaker than 'A' category peers.'' Chile last year placed a $1 billion bond in New York, which Larrain said at the time boasted the lowest-ever coupon paid by a Latin American issuer. Chile's benchmark overnight interest rate has stayed on hold at 5 percent since a cut in January largely because the small, export-dependent country has shown better-than-expected resilience to slowing global demand. The local peso has strengthened nearly 8 percent this year, sparking market speculation over a potential intervention, though central bank president Rodrigo Vergara said earlier on Thursday it wasn't the moment for an intervention.

Bank of America Merrill Lynch, HSBC, and JPMorgan were mandated as bookrunners for the Chilean bond, IFR, a Thomson Reuters service, said.

(Reporting by IFR and Reuters' Moises Avila in Santiago, Caryn Trokie in New York, Writing by Alexandra Ulmer)