The Situation
Following its issuance in December 2020, the inaugural bond of this diversified energy company, which operates conventional and renewable power plants in several Latin American countries, had been trading at or near distressed levels. The strong decrease in the bond price was at least partly due to rising interest rates globally. However, the Company was delivering against the business plan presented during the 2020 investor roadshow as well as consistently increasing EBITDA quarter over quarter.
Other factors weighing on the bond price included a perceived increase in regulatory risk in one of the Company’s key markets; a complex operating and capital structure; split credit ratings; high debt leverage and; a lack of trading liquidity.
Given the poor performance of the bond and complexity of the Company’s investment story, the senior management team retained InspIR Group in the summer of 2022. We were also engaged because the Company lacked a dedicated head of investor relations, with the function being covered by the head of communications of its holding company.
Strategy to Address Bond’s Discount
Based on market intelligence gathered by InspIR Group, we designed and executed a debt IR strategy to help correct the large discount in the Company’s bond. The core elements of the strategy were to raise the Company’s visibility in the credit markets, with the objective of increasing investor demand for the bond, and to calibrate market communications to effectively address misconceptions about regulatory risk and concerns about the complexity of the Company’s capital structure.
Tactics Employed Under Investor Relations Strategy
InspIR sought to increase research coverage, with the aim of increasing the Company’s exposure to institutional investors. Specifically, we targeted and pitched bank credit analysts, highlighting the disparity between the bond’s trading levels and the Company’s proven business model, which generates reliable and predictable operating cash flows. Additionally, we reengaged one of the lead underwriting banks to secure the Company’s participation at two of the most important investor conferences during the calendar year.
To better inform the communications strategy, InspIR conducted a perception study to fully understand the other key factors contributing to the bond’s discount. One of the primary tactics that we employed was re-developing the Company’s investor presentation, resulting in a streamlined and simplified investment story. Another was to enhance market communications to correct misperceptions about regulatory risk in the Company’s key market. We also developed slides to provide clarity on the capital structure, including the sound matching of the Company’s assets and liabilities, its long-dated revenues and reliability of cash flows, and interest rate protection on the Company’s debt.
Tangible Results Within 12 Months of Engagement
InspIR Group’s investor relations strategy produced solid results in the first year of our engagement. Four additional banks began coverage of the Company – Barclays, BTG Pactual, Credicorp and Oppenheimer. In addition, the Company was invited to JPMorgan’s Global Emerging Markets Conference and Emerging Markets Credit Conference, which are among the largest global credit conferences. And since InspIR Group was retained by the client, the bond price has increased 7.4%.
Contact InspIR Group today to learn how you can take your company’s investor relations strategy to the next level.
