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Ecopetrol sold $2 billion of 31-year bonds after yields drop

ANDREA JARAMILLO and KATIA PORZECANSKI

BOGOTA, Colombia (Bloomberg) -- Ecopetrol sold $2 billion of 31-year bonds as borrowing costs for longer-dated debt fall to the lowest in almost a year.

Finance Minister Mauricio Cardenas told reporters in Bogota on May 20 that the offering was a “total success.” The oil company sold the securities to yield 5.92% more than similar-maturity Treasuries. Deutsche Bank and Goldman Sachs Group managed the sale.

The new bonds will be rated BBB, the second-lowest investment grade and in line with Colombia’s government, Fitch Ratings said in a statement. The average cost companies in developing countries pay to borrow for more than 10 years is about 6.5%, the lowest level since June 2013, according to JPMorgan Chase & Co.’s CEMBI Broad index.

“The yield seems quite tight in our opinion and still the issue seems to be in great demand,” Jennifer Stubbert, a fixed-income trader at Credit Agricole’s Miami brokerage unit, said in an emailed response to questions. “I would expect any investment-grade corporate credit to be well received. In the case of Ecopetrol you also have the government credit behind it, and it’s a well known issuer.”

The offering follows a surge in corporate bond sales across emerging markets as long-term borrowing costs for companies in developing markets fall. The oil company will use the funds to help pay for its $68.5 bn capital expenditure program for 2014-2020, Fitch said in a statement.

Ecopetrol last tapped international markets in September, when it sold $2.5 bn of debt due in 2043, 2023 and 2018. The yield on the bonds due in 2023 have fallen 0.6% point this year to 4.51%.

05/21/2014

 

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