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Argentina's Pampa makes bond debut amid strong demand

By Paul Kilby

NEW YORK, Jan 17 (IFR) - Argentina's Pampa Energia (B3/B-/B+) launched a debut 10-year non-call five bond amid strong demand Tuesday, getting ahead of the government's multi-billion dollar trade later in the week.

Investors took a shine to the diversified utility and saw upside in a company expected to benefit from the new government's market-friendly policies in the energy sector.

With order books breaching US$4bn, leads were able to aggressively ratchet in pricing before launching a US$750m trade at a yield of 7.625%.

That was arguably a good 50bp inside initial price thoughts of low 8% area and the tight end of guidance of 7.75% (+/-12.5bp).

At the final yield, the deal is coming about an eighth of a point wide to 2023s issued by Petrobras Argentina, the company Pampa bought last year in a transaction valued around US$1.4bn.

Those bonds have been trading at around 7.45%-7.50%, according to bankers away from the deal.

It also barely offers a premium to the 7.50% secondary yield on YPF's 2025, despite investor hopes that it would come 25bp back to the state-controlled oil entity.

"Pampa is more diversified and has a more stable revenue stream than YPF, though the purchase of Petrobras Argentina will bring in more revenues from E&P and petrochemicals," said Omar Zeolla, a credit analyst at Oppenheimer & Co.

The company has stakes in electricity distributor Edenor, transmission company Transener, gas credit TGS and Petrobras Argentina, among others.

Pricing on Pampa, which is now the country's largest electricity company, also came well inside a shorter-dated bond issued by another Argentine utility, B3/B+ rated Genneia.

Genneia, also involved in gas distribution as well as electricity generation and distribution, priced a 2022 last week to yield 8.75%.

That bond has since tightened to around 8.35%, pricing in the 70bp premium to Pampa that some investors had been requesting when Genneia printed last Thursday.

Pampa is using proceeds from the bond to refinance debt and fund capital expenditures.

The bond will help it extend maturities and position it to take better of advantage of investment opportunities in the country's energy sector, the company said in an investor presentation.

Much of Pampa's capex dedicated to growth will go toward the construction of new generation plants that qualify for higher capacity prices and are paid in US dollars, noted Fitch.

It is also expanding into natural gas as the government encourages local production to substitute expensive imports.

Pampa's acquisition of Petrobras Argentina was part of that effort, making the company the second-largest producer of unconventional gas in the country, according to Itau.

The company's electricity distribution arm, which suffered under the prior government's price suppression policy, is also expected to return to profitability as President Mauricio Macri tries to liberalize the sector.

(Reporting by Paul Kilby; Editing by Marc Carnegie)