Morales & Besa advised Cencosud S.A. in the tender offer of its senior notes

July 21, 2017

Morales & Besa advised Cencosud S.A. in the tender offer of its senior notes 5.550%, due on 2021 and senior notes 4.875%, due on 2023. With respect to 2021 notes, valid tenders were received for US$492,853,000 and with respect to 2023 notes, valid tenders were received for US$882,156,000. Simultaneously, and with the purpose of financing the cash tender offer and for other general corporate purposes, a new issuance of notes in international markets for a total principal amount of US$1,000,000,000 was issued, with an interest coupon of 4.375%, due on July 17, 2027. The notes were issued at a price of 99.647%, under Rule 144A and under Regulation S of the Securitites Act of 1933 of the United States of America.

Additionally, subsidiary Cencosud Retail S.A., granted a personal unconditional guarantee to secure the new issuance.

The transaction was challenging in a number of respects. First, a very aggressive timing. Within only one month the working group was able to launch and close a tender offer for the purchase in the open market of outstanding 2021 notes worth US$492,853,000  and 2023 notes worth US$882,156,000, and, at the same time, place new notes worth US$1,000,000,000 to fund the purchase price of the tender offer and other corporate uses.

Second, the newly issued notes were placed at an unprecedented spread of 4.375%, the lowest ever in the history of the company.

Third, the transaction had the corporate guarantee of Cencosud Retail S.A., a majority-owned affiliate of the issuer and thus a related party transaction, which required compliance with special corporate governance procedures for its approval. As of this date, the transaction is the largest corporate bond issuance on record for this year.

The team at Morales & Besa was led by partner Guillermo Morales with senior associates Ignacio Menchaca and Jaime Rosso, and associates María José Rojas and Javiera Veloso.

J.P. Morgan Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated served as Brook-Running Managers for this offering.