Chile’s ENAP Weighs Up to $700 Million Bond Sale as Yields Drop

Empresa Nacional del Petroleo, Chile’s state-owned oil refiner, is considering selling as much as $700 million of bonds overseas to refinance maturing debt as an emerging-market rally sends yields to four-month lows.

ENAP, which owns Chile’s three oil refineries and explores for gas, may issue notes in dollars or euros in the second half of this year, Chief Financial Officer Ariel Azar said in an interview in Punta del Este, Uruguay, on Wednesday. No decision has been made to sell notes, he said.

The Santiago-based company, which has been in talks with banks about ways to prepay debt maturing in 2019, is looking to exploit a market in which average yields of dollar bonds issued by developing-market companies has fallen to 5.54 percent from a December peak of 6.55 percent as concerns over a crisis in Russia subside, according to data compiled by Bloomberg.

“We want to make the most of this scenario,” Azar said. “It’s very likely that we’ll issue something. If we do, it will be in the second half of this year probably in September or October for an amount of about $500, $600, $700 million.”

While ENAP is cutting back on total capital expenditures this year, it’s boosting spending on exploration and production to $350 million from $245 million last year, Azar said.

The company will also seek a $400 million capital increase in 2016, which would be the first since the government allocated $250 million in 2008, Azar said. ENAP will take control of a 20 percent stake in the state copper mining company’s Luz power project and seek a majority partner to develop a gas power station in northern Chile.

ENAP also plans to roll over $300 million in short-term bank loans that are maturing in 2015, Azar said.

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