AUGUST 19, 2021 8:00 AM

Management has promised to stay in the IG category

buy

We maintain a positive attitude towards the credit profile of the Colombian quasi-sovereign company Transportadora de Gas Internacional (- / Baa3 / BBB). The fall in the value of securities since the beginning of the year was caused by concerns about a decrease in EBITDA due to the loss of almost 20% of contracts in 2021. In May, the yield on Eurobonds maturing in 2028 exceeded 4%. However, according to the results of the first half of the year, the company's EBITDA amounted to $ 324 million, which corresponds to almost half (48%) of the indicator for 2020 ($ 675 million). The results encouraged investors, and bond yields began to decline. Market consensus now expects the company's EBITDA for the year to be approximately $ 671 million, which is almost in line with a year ago. According to market expectations, in 2022 the figure will increase to $ 675 million.

YTM
2.4%

RISK
- / Baa3 / BBB

DURATION
6

Currently, the only issue of TRAGSA 28 Eurobonds continues to trade with widened spreads at the level of 230-240 bp. even though the company has two investment ratings from the agencies Fitch and Moody's with a stable outlook. Thus, the Eurobond issue looks attractive in terms of risk / return, and has the potential to reduce the yield by 30-40 bp. In addition, the company's management announced that it will maintain the financial performance of Transportadora de Gas Internacional at the appropriate levels, which will meet the criteria of the world agencies to maintain the credit rating at the investment grade. TRAGSA 28 (USP93077AC28) offers a 3.4%-dollar yield on a 6-year duration.

Transportadora de Gas Internacional S.A. E.S.P. operates as a stated-owned utility service company. The Company offers natural gas transportation, parking, packaging, gas loaning, and pipeline expansion services. Transportadora de Gas del Internacional serves customers in Colombia.