Goldman Sachs eyes raising funds in Chile

Thu Feb 28, 2013 4:23pm EST

NEW YORK, Feb 28 (IFR) - Goldman Sachs has filed a 50-year shelf with Chilean regulators to issue up to USD965m equivalent in bonds to local investors - the first-ever such offer from the US investment banking giant.

The move could boost the local Huaso market, which has floundered in recent years. A source with knowledge of the transaction expects a shorter maturity than 50 years.

Goldman Sachs has raised about USD300m equivalent in Chilean pesos in the global markets since 2006, but it has never before issued a so-called Huaso bond in the local market.

The proposed bond is "consistent with our desire to play a constructive role in the development of Chilean capital markets and to further diversify our investor base," a spokesman said.

He said the bank was also considering opening an office in Chile, and that the Huaso program was a way to further the bank's presence in the country.

Chile has one of the deepest local capital markets in the region and has been seen as an ideal stomping ground for other Latin American borrowers.

According to one banker, Chilean investors now have between USD300m-USD350m of assets under management.

But despite its potential, the Huaso market has only developed in fits and starts since telecom America Movil open this space in 2009 after years of leaping regulatory hurdles.

Only a handful of borrowers have tapped this asset class since then, despite regulatory changes to broaden the borrower base.

In some cases, it has been a matter of cost given the relatively shallow but deepening swaps market.

In 2011 regional development bank Bladex postponed its UF2.5m (USD108m) local bond after higher cross-currency swap rates made the transaction less attractive.

This past December, however, Brazil's Banco Pine priced a UF1.5m (USD72m) 6% senior unsecured 5-year to yield 6.75%, coming inside initial price expectations of around 7%-7.25%.

This was the first time that a Brazilian issuer sold Huaso bonds.

Earlier in 2012, Mexican homebuilder Corporacion Geo also sold a Huaso bond, but in an extremely small deal.

A Mexican homebuilder and a mid-tier Brazilian bank may not have been ideal credits to revive the Huaso market, as investors have cast a wary eye on both sectors in recent years. Indeed, in Banco Pine's case, pension funds were not the main drivers of the trade, as they normally are in Chile.

Instead, the deal attracted insurance companies, mutual funds, banks and family offices that have fewer opportunities to add foreign names to their portfolios (especially paper denominated in inflation-linked UFs).

Chilean investors have also been unwilling to venture too far down the credit spectrum after the accounting scandal at local retailer La Polar in 2011 shook confidence.

"La Polar changed risk perception of many pension funds," said a banker last year.

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