Century Bonds: From one extreme to the other
Two years ago in the wake of the Mexican peso crisis, Latin American issuers were unable to raise even short-term debt. Now a Chilean credit has launched the continent's first 100-year bond obtaining the tightest pricing for an emerging market issuer in this niche area. Strong demand for the bonds of electricity generator Endesa pushed up the size of last month's issue from $170 million to $200 million.
But while the Endesa century does provide proof of South America's improving fundamentals, analysts say this and other emerging market centuries were driven more by issuer concerns about image and US investor thirst for blue-chip credits offering above average yields. Only a handful of emerging market issuers have the capability to do 100-year bonds and Endesa was only the seventh company outside the US to tap the sector. Other members of this exclusive club include India's Reliance Industries, Tenega Malaysia and the People's Republic of China. All carry investment grade ratings.
"There is a clear difference between issuers of this quality and other emerging economies," says Brian O'Neill, Latin America managing director for Chase Manhattan, which led the Endesa deal. "Chile is a high-grade investment country and Endesa is a high-grade company that has issued yankee bonds before and has a large investor following with 47,000 shareholders, 9% of whom are non-Chileans."