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Background Arcor retains strong gross and net leverage ratios. These stood at 1.8x and 1.2x respectively at the end of June 2016. The company’s US$350mn bond came as part of the its US$800mn global notes programme, and will be used to repurchase the company’s US$200mn 7.25% 2017 notes, as well as some of its outstanding local currency debt and for working capital and general corporate purposes. Transaction Breakdown Arcor had the option to issue either a longer 10-year or shorter dated bond. A relatively typical (for Argentine entities) 7-year (NC4) shorter dated transaction was chosen as it allowed for the company to pay a lower rate. Initial price thoughts (IPTs) were originally set at 6.5%. In launching the bond, a number of private banks that already held the company’s US$200mn 2017s looked to roll over their exposure, which in itself led to over US$1bn in demand for the bond. The bond was originally split between around a 35% allocation amongst banks and private banks, with the remainder going to asset managers. However, after demand for the bond reached over US$1bn on the second day of marketing, private banks accounted for over 75% of the bond. Combined with additional interest, demand for the bond eventually led to an orderbook of over US$2bn. As a result of substantial demand, Arcor was able to tighten the pricing from the IPTs by 50bp to 6% by the time the transaction priced, and the deal was launched on July 6 2016, set to mature on the same day in 2023. |
Although the B1/B+ (Moody’s/Fitch) rated transaction carries a bullet payment system at maturity, the bond carries optional redemptions which can be claimed in 2020 at 103%, 2021 at 101.50% and 2022 at 100%.
By geography, the bond was distributed 55% in the US, 14% across Latin America, 30% across Europe and 1% throughout the Asia-Pacific region.
