La Araucana to tap debt markets again in 2011 to reduce bank funding

Tuesday, December 21, 2010

Chile's second-largest social security benefits nonprofit association, Caja de Compensacion La Araucana, will tap the local market again in January and March next year, as it keeps reducing its funding from banks through debt instruments, CFO Patricio Cofre told BNamericas.

La Araucana, which also makes loans to members, carried out two bond issues earlier this month for a total of 20bn pesos (US$42.6mn). Investor demand for the securities sold on December 1 and 15 hit 19bn pesos and 13.5bn pesos, respectively.

The bonds are part of a larger 45bn-peso, 10-year bond program that is rated A by local ratings agency Feller Rate.

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La Araucana has been reducing its exposure to banking financing since 2008 through the issuance of commercial paper and portfolio securitizations and now placed its first-ever bonds.

Bank loans represented 60% of the company's liabilities as of end-June. Cofre said the company will aim to lower that figure to 50% next year.

Proceeds from the bond issues will go to fund the company's 2011 expansion plans, which include growing lending by 10% to 250bn pesos, he said.