SMU Bonds Rally in Santiago on Corpbanca Stake Sale Speculation

SMU SA bonds rallied on speculation billionaire owner Alvaro Saieh will sell his controlling stake in Corpbanca SA and use the proceeds to rescue the Chilean grocery chain.

The price on the securities maturing in 2020 rose 5.66 cents to 61.94 cents on the dollar at 12:56 p.m. in New York. The yield fell 227 basis points, or 2.27 percentage points, to

18.22 percent, the biggest drop since the debt was issued in February. The bonds are the most-traded dollar securities today in emerging markets, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Speculation that Saieh will sell control of Corpbanca to meet a pledge to invest $300 million in SMU by year-end mounted after Itau Unibanco Holding SA told analysts on a conference call last week that Chile is a priority. SMU is in violation of its debt agreements after restating first-quarter earnings.

“It is just natural that the price reflect the benefit that the owner is selling the bank,” Klaus Spielkamp, a fixed-income trader at Bulltick Securities LLC in Miami, said by e-mail. “It is understood that he will be more able to capitalize SMU.”

Press representatives for SMU, Corpbanca and Saieh didn’t immediately respond to requests for comment.

Shares of Santiago-based Corpbanca, Chile’s fourth-largest non-state-owned bank, jumped 2.8 percent to 6.50 pesos and are up 12 percent over three days, the most since 2011. The benchmark Chilean IPSA index gained 0.8 percent today.

Before it's here, it's on the Bloomberg Terminal.