The Ministry of Finance of Chile issued its first Euroclearable social bonds for a total of US$2.1 billion (CLP$1.600.000 million) on Thursday November 19th, 2020, through a book building process, with simultaneous offering in local and external markets.
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 instruments issued were peso denominated bonds maturing in 2028 (BTP-2028) and 2033 (BTP-2033), for a total of US$1,372 million and US$732 million respectively. The rates obtained were 2.5% for the BTP-2028 and 3.4% for the BTP-2033; demand reached 3.1 times the amount offered. Considering the total amount issued in this operation, foreign investors were allocated 48% of the total, higher than the previous record of 24% of 2019.
The operation was part of the 2020 issuance plan, for a total amount of US$12.9 billion, with the objective to finance the Budget of the calendar year. Of this plan, US$5.3 billion were issued in foreign currency. Considering the social bond issuances, total issuances in the year reach approximately US$12.5 billion of the 2020 issuance plan of US$12.9 billion.
The allocation of the bonds was executed through an OTC book-building process, with an order book in which local and foreign investors participated, according to the Rule 144A and Regulation S, issued under the Securities Exchange Act of the United States.
The portion allocated to foreign investors will be initially maintained in Euroclear Bank, in the Depósito Central de Valores, and could be traded in that platform.
In this occasion, the Coordinator Banks were Citigroup Global Markets Inc., Santander Investment Securities Inc. y Scotia Capital (USA) Inc., and the international legal advisory was in charge of the firm Gottlieb, Steen & Hamilton. The local legal advisor was the firm Morales y Besa.