Colombia reopened its 2019 bonds Tuesday, looking to secure 2010
financing as the ongoing credit crisis continues to cloud the outlook
for emerging-market debt.
The government sold the $1 billion in bonds at 99.999 to yield 7.375%,
people familiar with the deal said late Tuesday. Books on the reopening
closed at $3.8 billion, a source familiar with the deal said. The bulk
of the investors hailed from the U.S., while about 15% were in Latin
America and about 20% in Europe, the source said.
The yield was lower than earlier guidance. Citigroup and JPMorgan are
the managers. The notes were originally sold Jan. 6, when the
government raised $1 billion at a price of 99.136 to yield 7.5%. Books
then reached $3 billion.
Colombia’s Finance Minister, Oscar Ivan Zuluaga, said “Not only the
demand for the bonds was important, but the sale was done with better
conditions and lower yield.” He added “The Colombian sovereign debt
performed favorably in the markets. This shows the confidence of
foreign investors in the country”. Zuluaga said the government may
further pre-finance 2010 with loans from multilateral lenders.
The 2019s traded around 102 bid in New York on Tuesday, compared with a
Monday close of 103 bid, according to traders. The bonds touched 99
right after the reopening announcement but bounced back fairly fast,
they said.
The Colombian deal follows those of Peru and Panama, both of which sold
bonds in March. Brazil and Mexico, as well as Asian emerging markets
such as South Korea and Indonesia, also tapped international markets
earlier this year, taking advantage of tightening spreads and an uptick
in investors’ risk appetite.
Colombia’s risk premium on JPMorgan’s Emerging Market Bond Index Global
closed Monday at 422 basis points over Treasurys and hovered around 435
basis points late Tuesday.
That compares with a spread of 474 basis points over Treasurys on Jan. 2, according to JPMorgan.
The broader emerging-market risk premium on JPMorgan’s EMBIG hit 700
basis points over Treasurys Jan. 2 but closed Monday at 581 basis
points. It hovered around 589 basis points late Tuesday.
Nick Chemie, head of emerging markets at RBC Capital Markets in
Toronto, said that it makes sense to come to the market and get
financing for 2010 started as nobody is sure how firm markets will be,
despite the current good run.
“It was just a matter of who was going to be next,” he said. Chamie
said he expects the deal to do well. Colombia is among those emerging
markets well regarded by investors, he said.
Fund manager Roberto Sanchez-Dahl with Federated Investments said
market conditions are appropriate for Colombia to tap, but he is
unlikely to buy more as he is satisfied with his neutral position on
the country, he said.
“I’d be a bit more enthusiastic” if the country were offering a bigger discount, he said.
Colombia, despite being seen as credit worthy, has disclosed a gap in
its 2009 budget due to slackening tax revenue and the effects of the
global economic crisis.
In late March, Deputy Finance Minister Natalia Salazar said the
government will get 2.5 trillion Colombian pesos ($1.05 billion) less
in tax revenue in 2009 than previously expected as a result of the
country’s current economic slump.
The Finance Ministry last Wednesday said it will borrow $740 million
from multilateral lenders to plug the expected budget deficit and
additionally use COP908 billion currently in its vaults.
Colombia has weathered the crisis relatively well but hasn’t been
unscathed. The country’s gross domestic product contracted 0.7% in the
fourth quarter of 2008 and likely contracted in the first quarter of
this year, according to analysts and top officials at the Central Bank.