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Background The deal proved to be an efficient method for financing the company’s working capital and investments in Argentina. YPF was able to tap a wider investor base on increased risk appetite for Argentine paper in the international markets following renewed relations between the country and foreign investors which had re-opened Argentina to investment. The global market sell-off that followed the UK’s decision to leave the EU, combined with low interest rates across developed markets leading to increased appetite for EM paper, created a strong market backdrop for the issuer to tap the markets, which was further aided by a re-activation in the Latin American primary markets. Linking the dollar-denominated obligations of the bond to the Argentine peso also enabled the company to successfully reduce its debt-currency risk exposure. Transaction Breakdown Following positive feedback from key accounts with significant reverse enquiries, the syndicates announced the benchmark-sized US dollar-denominated ARS-linked 4-year transaction with a 2-day execution offering on Wednesday June 29 2016 at 1:30pm EST. This allowed the majority of investors to continue their analysis and focus on the mechanics of this unique asset class, while the anchor investors had already indicated orders. |
The orderbook quickly reached around US$750mm a few hours after announcement. IPTs were set at Badlar+400bp, with a floor of 18%.
On Thursday June 30 the offering was priced at Badlar+400bp. Badlar was set at 27.3542% and the FX rate was set at 14.9969 for the first coupon.
Although the initial size expectation was at US$500mn, YPF was able to utilise a strong orderbook and record demand to finally price a US$750mn bond, and the B3/B (Moody’s/Fitch) rated deal was issued on July 7 2016 to mature on the same day in July 2020. The transaction carried a 4-year tenor with a bullet payment.
The final book reached around US$1.4bn (1.8x oversubscribed), and comprised high-quality accounts, with key anchor orders dominated by real money investors from the US and Europe.
By geography, the bond was distributed 87.70% across North America, with the remaining 12.30% distributed across Europe.
By type, 71.70% of the bond was purchased by asset managers, 28.10% was bought by hedge funds and 0.20% was purchased by other buyers.
