Bloomberg reported that Codelco raised USD 2 billion in a sale of debt that includes its first 30 year bond in more than 5 years.
The Chilean state owned company sold USD 750 million of 30 year bonds at an extra yield or spread of 180 basis points above US Treasuries. The company also placed USD 1.25 billion of 10 year bonds at 165 basis point spread.
Codelco plans to invest about USD 26 billion this decade to modernize aging mines and offset declining output from ore with less copper content. The yields it achieved are among the cheapest funding it has ever had.
The company said that they are recognition of the credit quality of Chile and of Codelco in an environment characterized by volatility in international financial markets. The yield on 10 year US government bonds fell to 1.5%, 6 basis points short of the 1.44% record low reached on June 1st 2012. The yield on 30 year US Treasury bonds fell to 2.6%, 9 basis points above the record low.
Codelco set yields of 3.157% on the 10 year bond of and 4.398% on the 30 year bond. The company received orders for five times as much debt as it sold.
Codelco will use the proceeds to refinance debt as well as to fund its investment program for 2013. The company has USD 435 million of bonds falling due this year and another USD 500 million next year and is building an underground mine at its century old Chuquicamata open pit in the Atacama desert. The government allowed Codelco to retain USD 800 million or 40% of last year’s profit.
The state company last sold debt in October 2011 issuing USD 1.15 billion of 3.875%, 10 year notes to yield 167 basis points more than similar maturity Treasuries. Those bonds traded today at a spread of 169 basis points.
Moody’s Investors Service said that the bonds will be rated A1, the fifth highest investment grade rating. Codelco’s ownership by Chile, the highest rated Latin American country is a major factor in its rating, Moody’s said. Credit- default swaps of Chile trade just 15 basis points wider than Germany’s.
Source - Bloomberg
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