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CASE STUDY: Suramericana Follows Record-Making Trade with Bridge Loan, Bond

In April 2016 pan-American conglomerate Grupo de Inversiones Suramericana S.A. followed up its record-breaking 2011 bond with a US$550mn issuance, which was used to repay a bridge loan posted a month earlier and fund the acquisition of RSA’s Latin American operations.

Mar 13, 2017 // 11:46AM

Deal At A Glance

Issuer: Grupo Sura Finance

Deal Type: Acquisition financing

Ratings: BBB/BBB (S&P/Fitch)

Governing Law: NY

Guarantors: Grupo de Inversiones Suramericana S.A.

Listing: Luxemburg

Bookrunners: Bank of America Merrill Lynch, JP Morgan

Legal Adviser to JLMs: Simpson Thatcher & Bartlett LLP

Legal Advisers to issuer: Shearman & Sterling LLP

Size: US$550mn

Issue Format: 144A/Reg S

Tenor: 10 years

Date of Issue: April 29 2016

Maturity: April 26 2026

Coupon: 5.500%

Yield: 5.650%

Spread: UST+371.9bp

Price: 99.68%

Use of Proceeds: Repaying existing Bridge Facility issued in March for the acquisition of 7.3% stake in SURA Asset Management (SUAM)

Background

In September 2015, Grupo Sura increased its controlling position in SUAM (SURA Asset Management, the largest pension fund manager in Latin America) to 71.38% from 67.05%, and also announced the acquisition of RSA Insurance Group plc in Latin America, as part of the strategic expansion of its insurance operations across the region.

In addition, the company exercised its call option to acquire an additional 7.3% stake in SUAM in February 2016, using a complex financing scheme – a bridge loan followed by an unsecured bond, issued by an SPV, Gruposura Finance – to complete the transaction in the following two months.

Transaction Breakdown

Teaming up with Bank of America Merrill Lynch, which also led Sura Asset Management’s Debt IPO in 2014, Grupo Sura became the first Colombian corporate to tap the international capital markets in 2016, setting an outstanding precedent for future deals with a US$550mn 5.500% Senior Unsecured Notes due 2026.

The initial offering followed an extremely well-received five day-long, two-team global roadshow in London, New York, Los Angeles, Boston and Santiago, through which Grupo Sura met with over 50 investors in “one-on-one” meetings and calls.

After receiving US$250mn in lead interest, the company announced an offering with initial pricing thoughts of the 6.00% area and a size of US$540mn.

The transaction generated strong demand, achieving an oversubscribed orderbook in the first thirty minutes after the offering was announced. The orderbook peaked at US$2.9bn from 215 accounts, led by broad global demand from top institutional investors in the United States, Europe and Latin America.

A strong orderbook allowed for significant price compression.

Official price guidance was released at 5.75% area (+/- 10bps), ultimately allowing Grupo Sura to price at 5.65% for a total size of US$550mn, indicating a tightening of 35bp from IPT to launch.

About 54% of the notes was picked up by investors in the US, followed by 32% being placed with accounts across the EMEA region and 14% being placed with investors in Latin America.

Americas Andes Latin America

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