Inkia Energy sets low 6%-area IPT for USD 450m 2027 NC5 bond - Debtwire

Inkia Energy sets low 6%-area IPT for USD 450m 2027 NC5 bond

01 November 2017 - 12:00 am

Inkia Energy (BB-/Ba3/BB) has set initial price thoughts of low 6%-area for a new USD 450m senior unsecured 10-year non-call five-year bond, according to a source close to the process. The deal is expected to price Thursday 2 November, the source added. The Peru-based power generation company was scheduled to finish fixed-income investor meetings today.


A price in this range would offer a premium to the outstanding bonds of Inkia’s two investment-grade subsidiaries, a fixed-income investor and a DCM banker told Debtwire. Kallpa Generacion’s (Baa3/BBB-) 4.875% USD 350m 2026 bond traded on 26 October at 106.250 to yield 3.985%, and Cerro del Aguila’s (Baa3/BBB-) 4.125% USD 650m 2027 bond traded on 31 October at 99.910 to yield 4.136%, according to MarketAxess.


Inkia’s own 8.375% USD 450m senior unsecured bonds due 2021 traded on 25 October at 102.150 to yield 6.486%.


A pickup of at least 50bps to the two subsidiaries was a reasonable expectation, according to two fixed-income investors and a DCM banker away from the deal. The banker highlighted the quality of Inkia’s management and its recent growth trajectory.


There may soon be a change of ownership, however. According to Inkia’s offering memorandum, its controlling shareholder Kenon Holdings “is in advanced negotiations with a top-tier financial investor, which currently owns Latin American power sector assets,” to sell all of the assets belonging to Inkia parent IC Power in Latin America and the Caribbean.


This unnamed investor is likely private equity firm I Squared Capital, according to the DCM banker, the investors and a third fixed-income investor. I Squared bought Duke Energy’s assets in several LatAm countries in 2016, and is the controller of Orazul (BB/BB).


“I Squared may have different policies, existing management may change, and they may put more debt on the company as part of the purchase process, so I definitely expect a premium,” according to the first fixed-income investor.


The change of ownership is not a great concern, the DCM banker and the third fixed-income investor said, as there is no reason for it to mean Inkia should not continue to perform the same.


Management is expected to remain in place in the event of a sale, a source familiar with the matter said, adding that “investors know Inkia assets, and they know the operating companies and the management.”


A spokesperson at Inkia declined to comment on the matter.


The possible change in ownership would not result in a material change in the company’s business risk profile and portfolio of assets, and in the company’s track-record of prudent corporate financial policies, Moody’s said when rating the new transaction.


Inkia is raising money to fund a tender offer for the existing 8.375% 2021 bonds. Credit Suisse and Scotiabank are acting as global coordinators on the new bond, with Citi as a joint bookrunner. Credit Suisse is managing the tender offer.

The borrower is a subsidiary of IC Power, which has energy operations in Bolivia, Chile, Colombia, Dominican Republic, El Salvador, Guatemala, Nicaragua, Panama, Peru and Jamaica, according to its website. IC Power also operates its business in Israel under a separate entity.


Inkia has aggregate installed capacity of 3,364 MW as of June 30, 2017, according to the company’s OM. In January 2016, it entered the electricity distribution sector through the acquisition of Energuate (Ba2/BB) in Guatemala.

Kallpa is the largest subsidiary of Inkia, according to Fitch. Founded in 2007 and based in Lima, Kallpa is the second-largest power producer in Peru in terms of installed capacity. Kallpa’s assets consist of a 545MW base-load hydroelectric plant, and two thermal generation plants with aggregate installed capacity of 1,063MW.


by Valentina Cordero and Mariana Santibanez