Cleary Gottlieb Steen & Hamilton has represented the Republic of Chile in two debt offerings registered with the U.S. Securities and Exchange Commission, plus on financing for Chile’s state-owned copper company as the South American copper giant tapped markets to help finance its COVID-19 relief and recovery efforts.
The Cleary capital markets team, led by Buenos Aires-based partner Andrés de la Cruz, guided Chile to the May 12 sale of $1.5 billion in notes due in 2031 and €500 million in notes due in 2025, while Shearman & Sterling New York-based partners Stuart Fleischmann and Grissel Mercado advised book runners Citigroup, Itau and Scotia.
Also this month, Cleary partners Duane McLaughlin and Chantal Kordula represented state-owned copper firm Corporación Nacional del Cobre de Chile (Codelco) in $1.2 billion of financing transactions that closed on May 6.
Codelco is the largest copper producer in the world, with approximately 6% of global copper reserves, and is the largest company in Chile. As a wholly state-owned enterprise, Codelco contributes all of its net income to the central government’s budget through profit transfers.
Chilean President Sebastián Piñera declared a state of catastrophe over COVID-19 on March 19 and announced a series of extraordinary economic relief measures aimed at protecting health, salaries and employment in light of the outbreak and its impact on the global economy.
Piñera’s $12.1 billion emergency economic plan is equivalent to 4.8% of Chile’s gross domestic product. As part of that plan, the government authorized up to $4 billion in additional debt issuances in capital markets this year to help cover $10 billion in costs incurred in 2020.
Chile has adopted one of the strictest lockdowns in Latin America, having closed its borders on March 18 and mandated curfews in much of the country. Residents of some districts must seek permits to shop for medicine, food or to visit medical facilities.
“The measures implemented so far following the COVID-19 outbreak, together with lower external demand and tighter international financial conditions, have resulted in a slowdown in economic activity that will adversely affect economic growth in 2020, to a degree and for a duration that we cannot quantify,” the government of Chile said in a May 1 prospectus for the sovereign debt offerings.
The government estimated that Chile’s gross domestic product will contract by at least 2% in 2020, and possibly more if restrictions are prolonged to control the contagious disease.
The emergency economic measures include a $2 billion injection into Chile’s unemployment insurance fund that can be drawn by workers who must stay home and are unable to work remotely, or who have experienced wage cuts or a reduction in work hours.
The government has also rolled out $2 billion in emergency payments for low-income Chileans, financing for small businesses and suspended or delayed a host of taxes.
As of May 1, the Chilean Health Ministry had spent $1.4 billion to increase health personnel and the number of hospital beds, purchase technology and medical equipment, and enhance medical staff training.
Morales & Besa Ltda. acted as local counsel to the Chilean government for the sovereign debt offerings, while Philippi Prietocarrizosa Ferrero DU & Uría served as local counsel to the underwriters.
The Codelco transactions are key to shoring up Chile’s public finances. The company contributed $1 billion to government revenues in 2019, while private mining contributed $2.7 billion, according to the sovereign bond prospectus.
The Codelco financing included an $800 million bond offering for which Davis Polk & Wardwell partner Nicholas Kronfeld provided U.S. counsel to the banks and Holland & Knight acted as trustee. The financing also involved two separate bilateral credit facilities totaling $265 million for which Mayer Brown and Hughes Hubbard & Reed acted as U.S. counsel for the banks.
Carey y Cía. Ltda. served as Chile counsel to Codelco, while Philippi Prietocarrizosa advised the banks locally.