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Andean Borrowers Cut Through Volatility to Win Big at Bonds & Loans Latin America Awards

Despite a slowdown in some of the Andean region’s powerhouse economies and souring emerging market investor sentiment, many borrowers were unperturbed and moved into markets with inaugural, innovative transactions through much of last year. We take a closer look at some of the transactions originating from the region that won top prize at this year’s Bonds & Loans Latin America Awards.

Apr 17, 2019 // 11:49AM

The Market Insights team and GFC Media Group would like to thank all of the finance professionals who nominated transactions for this year’s Latin America Deal of the Year Awards, and for deal teams’ tireless efforts in helping borrowers achieve their core objectives, at the same time developing new structures and techniques to help push the industry forward.

And, last but certainly not least: congratulations to all of this year’s Awards winners. With so many high-quality deals nominated from the Andean countries and the wider region, this year’s Awards selection was more difficult than ever before.

And in view of our Bonds, Loans & Derivatives Andes conference taking place 25 April at the JW Marriott in Bogota, we wanted to take a closer look at some of the landmark transactions deserving of recognition and originating from the region.

The final step in the company’s refinancing strategy which began in 2016, Frontera Energy’s USD350mn senior unsecured notes were upsized on strong demand and priced aggressively in the middle of a bear market for EM assets. The issuance enabled it to refinance all of its outstanding 2021 notes at considerable discount, while shifting towards a much more flexible covenants package, giving it much more financial latitude in future transactions.

This well-timed foray into the syndicated loan market helped the borrower save considerable amounts in debt interest payments (USD6-8mn), reduce its overall cost of funding and smooth out its maturity profile. The transaction allowed the company to consolidate a number of facilities and lay the foundation for future funding operations in the international markets.

This dual-tranche loan featured a structure that enabled foreign lenders to participate entirely in local currencies in Colombia. This was also the first case of an assignment of a concession agreement in the 4G toll road program implemented by the Government of Colombia, making the structuring of the transaction much more difficult. That this transaction closed against a backdrop, with numerous corruption scandals linked with infrastructure projects in Colombia and the wider region, was a testament to the deal team’s ability to cut through the reputational and legal risks, creating a robust and replicable structure.

The Dominican Republic’s February 2018 sovereign issuance successfully established the country’s inaugural DOP-linked international benchmark (with international investors representing 99% of the final allocation for the local currency tranche), and the Republic’s lowest coupon ever for a 30-year international bond. The transaction also helped extend the average life of the country’s debt from 9.6 years to 11.3 years.

More than a year in the making, Santander Chile’s CLP75bn issuance marked the sale of the first Chilean CLP Cámara floating rating note, requiring the bank to work closely with a broad range of stakeholders to ensure operational and technological aspects were in place to support the transaction. A strong emphasis on educating investors was important, given the novel factors related to the valuation of the instrument when compared with conventional local market issuances, but the efforts more than paid off – carving a path for a wide range of corporates keen to find borrowing instruments that appeal to investors by protecting them from interest rate volatility.

This unique and innovative transaction culminated in the first project finance in Peru to combine a Rule 4(a)(2) bond with a syndicated loan. With its unusually long tenor on the bond side in particular, the deal was able to attract new pools of liquidity from institutional investors looking to gain exposure to Peruvian infrastructure through a strong, internationally-backed local partner. The deal paved the way other borrowers looking to combine capital markets structures to enhance their investment potential.

This transaction culminated in the first true mining project finance transaction to be executed in Ecuador, and the first mining project – a strategically important one, given its size and contribution to the local economy – to secure funding in Latin America in 2018. The deal employed a first-of-a-kind structure combining traditional and alternative financing sources for the first time in the industry, and required extensive collaboration and negotiation between the financing parties and the sponsor.

The unique A/B private placement structure deployed on Atlas Renewable Energy’s USD1084.mn private placement, the proceeds of which were used to refinance construction loans linked to two operating wind farms in Uruguay, was a rarity in the capital markets in light of its inclusion of both senior and subordinated tranches. It’s also the third green project bond issued out of Latin America, paving the way for more project-focused sustainability and renewable energy-focused transactions in the region.

This multifaceted multi-currency leveraged financing transaction and liability management exercise included a senior bridge loan facility, two dual-tranche bond offerings, and a tender offer for existing notes, with the maturity profile of the new issuances closely tailored to match the consolidated company’s cashflows while at the same time consolidating and terming out the company’s existing debt. The transaction helped InRetail bolster its position as a pharmaceutical industry leader in the Peruvian market and Andean region more broadly.

Andes Projects & Infrastructure Deals Americas Sustainable Finance Latin America

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