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CASE STUDY: Albanesi Utilises Rarely Used Structure for US$250mn Bond

Albanesi is one of the largest Argentine power groups, with almost 900MW of installed capacity. The company successfully issued its US$250mn bond in a rarely used structure – through a number of its subsidiaries – in the wake of the sovereign’s return to the international capital markets.

Nov 14, 2016 // 9:08AM

Deal At A Glance

Deal Type: Senior unsecured Eurobond

Deal Structure: 144A/Reg S

Co-issuers: Generacion Mediterranea SA, Generacion Frias

SA, Central Termica Roca SA (Albanesi Group)

Governing Law: New York law

Listing: Luxembourg Stock Exchange

Global Coordinators: Credit Suisse, JP Morgan

Joint Bookrunners: Credit Suisse, JP Morgan, UBS

Legal Advisors to Borrower: Simpson, Thacher & Bartlett LLP (US), Tavarone, Rovelli, Salim y Miani (Argentina)

Legal Advisors to Bookrunners: Skadden, Arps, Slate, Meagher & Flom LLP (US), Salaverri, Dellattore, Burgio & Wetzler Malbran (Argentina)

Size: US$250mn

Tenor: 7-year (NC4)

Coupon: 9.625%

Reoffer Price: 98.758% 

Yield to Maturity: 9.875%

Date of Issue: July 2016

Use of Proceeds: To refinance existing debt, finance capex and for general corporate purposes

Background

Albanesi looked to tap the markets in order to prepay debt so as to improve its debt profile and lower financial costs and as well as to finance capex.

The expenditure the company was looking to fund was mainly new generation capacity, which is of strategic importance to the new administration when taking into account electricity offer restrictions.

The expansion plan that the bond will finance is designed to increase the installed capacity of the company by over 50%.

The transaction itself was one of the first Argentine corporate debt issuances since the sovereign’s return to the international markets, and was the first co-issuer structure in over a decade.

Transaction Breakdown

Prior to pricing, the company met with key accounts in London, Los Angeles, Boston and New York, where the team had to split in two to cover the great demand for meetings

Additionally, more than 350 investors were met via a net-roadshow presentation.

Following the roadshows, on Tuesday 19 July, a 7-year NC4 transaction of US$250mn in size was announced with initial price thoughts in the high 9% area, and pricing was settled on the following day in order to provide more time to accounts to finalise their credit work. The books then went subject on Wednesday at 11am.

Guidance was released at 9.875%, the level at which the issuer was able to launch and price its debut transaction, and on July 20, the group successfully priced its debut international US$250mn 7-year NC4 bond, which was settled on July 27 and is set to mature on July 27 2023. The deal carried a rating of B+ from Fitch and B3 from Moody’s.

Although the transaction features a bullet payment at maturity, there are optional redemptions available after the non-call 4-year period expires; in 2020 at 104.813%, in 2021 at 102.406% and in 2022 at 100.00%

Albanesi’s subsidiaries, Generacion Mediterranea, Generacion Frias and Central Termica Roca were the co-issuers. The co-issuer structure was chosen as it allowed for the full operative cash flows of the power generation companies of the group to be harnessed.

The transaction was distributed 55% across Latin America, 29% in the US, 15% in Europe and 1% across the Asia-Pacific region.

By type, 62% of the bond went to asset managers, 24% to hedge funds, 8% to private banks and 6% to pension funds.

Americas Argentina

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