Thursday, july 22, 2021

Chile issues Treasury bonds for US$3.75 billion in foreign currency

The Ministry of Finance issued dollar-denominated Treasury bonds in the international markets for a total of US$3.75 billion. Today's issuances, along with the bonds issued yesterday in euros, totalized an equivalent of US$5.81 billion, which are part of the additional debt financing plan for 2021, previously reported. These issues are made in accordance with Law No. 21,288, which creates the “Covid-19 Transitory Emergency Fund”, which authorizes contracting debt up to the equivalent of US$8 billion, in foreign or local currency, until the end of June 2022, independently of the authorization contemplated in the 2021 Budget Law. 

This operation reaffirms Chile’s leadership in sustainable finance, reflected by thematic bond issuances. Chile is the only country in the Americas that has issued green bonds since 2019, social bonds since 2020, and sustainable bonds since 2021. Considering today’s operation, Chile has issued a total of approximately US$ 23.75 billion in labelled bonds, of which US$14.55 billion are social, US$7.7 billion are green, and US$1.5 billion are sustainable. Considering today’s issuance, labelled bonds represent 24.0% of the stock of central government debt, one of the highest shares in the world.

With this issuance, Chile has issued a total of approximately US$ 21.9 billion this year, of which approximately US$ 13.65 billion are foreign currency denominated bonds. Today's operation is the third of the year in dollars, following the operations carried out in January and March 2021. 

The new issuance of social bonds by the Ministry of Finance is in line with the efforts made in recent years to diversify the Treasury bond investor base. These measures include the adjustments that allowed international investors to participate directly in local currency debt issuances, the issuance of "green" bonds, which broadened the investor base to those with specialized environmental, social and governance (ESG) mandates, and the recent issuance of Formosa bonds, listed on the Taipei Stock Exchange.

Results of the Transaction

Today's transaction consisted of the issuance of three Treasury bonds for a total amount of US$3.75 billion, denominated and payable in US dollars, with maturities in 2033, 2041, and 2061. These operations obtained a demand of approximately US$8.9 billion, 2.4 times the allocated amount. The main results of each of the bonds issued today are the following:

• New social bond maturing in 2033 for US$2.25 billion at a yield of 2.577% (coupon of 2.55%), 130 basis points above the respective U.S. Treasury rate.
• Reopening social bond maturing in 2041 for US$1 billion at a yield of 3.139% (coupon of 3.1%), 130 basis points above the respective U.S. Treasury rate.

• Reopening social bond maturing in 2061 for US$500 million at a yield of 3.329% (coupon of 3.1%), 140 basis points above the respective U.S. Treasury rate.

The bonds issued are “social”, according to the definition included in the Republic of Chile’s Sustainable Bond Framework, published by the Ministry of Finance earlier this month. The Framework established the guidelines to issue green, social and sustainable bonds, according to ICMA standards. According to the Framework, resources collected in this issuance will finance projects that support households, education, essential health services as well as programs to prevent and/or alleviate the effects derived from COVID-19, among others.

The bonds were issued under the New York law and were registered under the U.S. Securities and Exchange Commission (SEC) using the shelf-registration normally used by the Republic of Chile.

The issuance was executed by the Ministry of Finance’s team, underwriter banks (BNP Paribas, CITI, Goldman Sachs, JPMorgan, Santander, y Scotiabank), and the international legal counsel of Linklaters and national legal counsel of Morales y Besa.


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