Goldman Sachs 50-Year Chile Bond Makes it First U.S. Issuer

Goldman Sachs Group Inc. plans to sell bonds with a maturity of up to 50 years in Chile, making it the first U.S. company to sell local debt in the Latin American country.

New York-based Goldman Sachs is seeking authorization to sell bonds worth 20 million unidades de fomento, the country’s inflation-linked accounting unit, which is equivalent to $966 million, according to Chile’s securities regulator.

“Chile now has the largest concentration in assets under management per capita in Latin America, which has made the country one of the most attractive new debt capital markets in the region for foreign issuers,” Michael DuVally, a spokesman for the fifth-biggest U.S. bank by assets, said in an e-mailed statement today. The bank is “actively considering” opening an office in Chile, he said.

Finance Minister Felipe Larrain has relaxed restrictions to encourage foreign companies to sell debt in Chile as he seeks to position the country as a financial-services hub. Brazilian lender Banco Pine SA and Mexican homebuilder Corp. GEO SAB are the only foreign companies to sell bonds known as “huaso,” which means cowboy in Chile, since Larrain first announced the initiative in March 2011.

Pension funds in Chile manage assets worth 61 percent of Chile’s gross domestic product and equal to almost 120 percent of the nation’s capital market, according to research by Mario Castro, an analyst at Nomura Holdings Inc. in New York. That compares with 18 percent of GDP in Colombia and 3.1 percent in Mexico.

Savings Rate

Chile’s high savings rate and limited number of large companies mean there is a shortage of assets available for investment, according to Valentin Carril, who oversees $5 billion as chief investment officer for Principal Vida Chile in Santiago and often buys foreign bonds that he swaps back into local currency.

Chile has the fourth-highest gross national savings rate in South America after Venezuela, Ecuador and Bolivia, according to International Monetary fund data.

The Goldman Sachs bond sale “is very appropriate for life insurers like ourselves,” Carril said. “It’s diversification and we don’t have to worry about currency derivatives. When the process of opening up markets was announced, I don’t think they really envisaged American companies coming here. It’s big news.”

Santander Advising

Chilean life insurers would welcome a bond due in about 30 years as it allows them to match the average duration of their portfolios with the duration of the annuities they sell, Carril said. The government plans to sell 30-year fixed-rate bonds for the first time this year.

Banco Santander Chile is advising Goldman Sachs’s on the transaction, according to an e-mailed statement from the Santiago-based bank’s press office.

Chile introduced its inflation-linked accounting unit in 1967. Seventy-percent of the country’s local debt market is denominated in unidades de fomento.

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