Call us on
+44 (0) 207 045 0920

Americas

CASE STUDY: City of Buenos Aires Successfully Launches US$890mn Bond

The City of Buenos Aires’ benchmark-sized US dollar-denominated bond allowed it to repurchase older debt as well as fund infrastructure projects across the City. The bond comes amid the wave of Argentine issuance following the sovereign’s US$16.5bn issuance, thus capitalising on investor demand for Argentine debt.

Oct 31, 2016 // 1:28PM

Deal At A Glance

Deal Type: Senior unsecured Eurobond

Deal Structure: 144A/RegS

Issuer: The City of Buenos Aires

Governing Law: UK law

Listing: Bourse Luxembourg (Euro MTF)

Bookrunners: Bank of America Merrill Lynch, Deutsche Bank, HSBC

Trustee, Principal Paying Agent, Transfer Agent, Registrar, Custodian, Common Depository: BNY Mellon

Legal Advisor to Borrower: Munoz de Toro

Legal Advisors to Bookrunners: Bruchou, Fernandez Madero & Lombardi, Linklaters LLP

Size: US$890mn

Tenor: 11 years

Coupon: 7.625%

Reoffer price: 105.5%

Date of Issue: June 2016

Use of Proceeds: To fund the purchase of notes from an expired tender offer and to finance infrastructure projects

Background

The City of Buenos Aires’ US$890mn bond is part of the City’s US$2.29bn medium-term note (MTN) programme.

The City’s government had authorisation to issue a US$500mn bond, but was able to upsize to US$890mn because of a spare US$390mn from a liability management transaction that did not close the previous year.

Roadshows were conducted for the public offering across Europe and the US and consisted of 1-on-1 investor meetings.

Transaction Breakdown

The B3/B-/B rated (Moody’s, S&P Global Ratings, Fitch) deal comprised a cash tender of up to US$390mn of the City’s 9.95% Series 11 notes due in 2017, which achieved a participation rate of 57.77%, amounting to US$237mn.

Following the roadshows, the orderbook began gaining traction. Demand for the bond reached 3x the total amount of the transaction at near US$2.6bn.

Initial price thoughts (IPTs) were in the high 7% area, but strong demand enabled the bookrunners to tighten the pricing achieve a final price guidance in the 7.750% area +/-12.5bp.

The deal finally priced on May 24 2016 at 7.625%, and was issued on 01 June 2016, set to mature on the same day in 2027.

By geography, 73% of the bond was distributed across the US, 22% across Europe, the Middle East and Africa, 3% across the Asia Pacific region and 2% across Latin America.

By type, 56% of the bond went to asset managers, 14% went to private banks, hedge funds bought 24% of the bond whilst other entities purchased the remaining 6%.

Americas Argentina

Bonds & Loans is a trusted provider of news, analysis, and commentary that helps illuminate the most significant issues, events and trends impacting the global emerging credit markets.

Recommended Stories