- State oil driller is first major LatAm company to sell in 2023
- Company was cut to junk in 2021 following sovereign downgrade
Oscar Medina and Maria Elena Vizcaino, Bloomberg News
EnergiesNet.com 01 11 2023
Colombia’s state oil company paid a heavy premium to return to the global bond market for the first time since 2021 as rates continue to rise for emerging-market borrowers.
Ecopetrol SA sold $2 billion of 10-year, US dollar-denominated notes with a coupon of around 9%, around 539 basis points over similarly dated Treasury notes, according to people familiar with the matter. The driller last sold benchmark bonds in October 2021 at a spread of 307 basis points.
The company said the proceeds will be used to fund part of its 2023 investment plan and to pay off $472 million left on a loan it took out to fund the acquisition of Inteconexion Electrica SA, a Colombian utility it purchased in 2021. It also has $1.8 billion of bonds due in September, according to data compiled by Bloomberg.
“Yield-hungry investors will happily accept low 9%, over 100 basis-points wide to existing bond for the risk of the credit,” said Billy Stewart, director at Advent Capital Management in New York.
Ecopetrol’s existing dollar bonds fell Tuesday, with the 2043 notes sliding 1 cent to 86.3, the lowest level since late December, according to indicative pricing data collected by Bloomberg.
“The company has a very ambitious capex plan for the year plus the maturity of the 23s in September and the ISA loan so I guess they want to start pushing those maturities,” said Lorena Reich, senior credit analyst at Lucror Analytics. “That’s the only reason why I think they would pay so much and not wait for better technicals.”
The sale marked the first issuance of 2023 for a major Latin American corporate borrower. The Mexican government opened the year with a $4 billion bond sale last week. Debt sales from the region are expected to bounce back in 2023 after rising borrowing costs caused last year’s sales to fall to the lowest since 2008.
Colombia has been forced to pay higher rates since losing investment grade in 2021 and electing President Gustavo Petro last year. The government, which owns 88.5% of Ecopetrol, has spooked investors with plans to phase out oil and coal as part of a transition toward renewables.
Colombia and Ecopetrol are rated BB+ by S&P Global and Fitch Ratings, while Moody’s still rates the company in the lowest investment grade level.
“With Ecopetrol’s Moody’s investment-grade rating possibly at risk, this may be an opportune time to price this deal,” said Jaimin Patel senior credit analyst at Bloomberg Intelligence.
–With assistance from Andrea Jaramillo and Sydney Maki.
bloomberg.com 01 10 2023