Celulosa Arauco y Constitución (Arauco), the forestry company of the Angelini group, placed the AH series of hybrid bonds in the local market for UF 10 million, the maximum allowed, equal to about CLP 413 billion or US$425 million, according to Diario Financiero. The placement rate was UF+4.13% a year, set in a Dutch auction, with a 163 basis-point spread over the sovereign bond curve, and demand exceeded the offer 1.5 times, according to sources cited by the same outlet. The company reported the placement in a material-event filing, which Diario Estrategia published on Monday, November 9 (Diario Estrategia). It is Arauco's second hybrid bond and the fifth in the history of the Chilean capital market.
View the data as a table
| Amount | UF 10 million |
| Placement rate | UF+4.13% |
| Spread over sovereign bonds | 163 pb |
| Demand over offer | 1.5 times |
The terms of Arauco's hybrid bond
The filing states that the bonds mature on December 7, 2058, with principal repaid in a single payment at the end. They pay a 3.75% annual coupon on principal in UF until December 7, 2033; after that, the rate resets according to the bond indenture. Interest accrues from September 7, 2026: there is a first quarterly payment on December 7, 2026 and then semiannual payments every June 7 and December 7. Arauco cannot call them before September 7, 2033. The gap between the coupon (3.75%) and the placement rate (4.13%) means investors paid less than face value for each bond. The credit rating is A+ (Feller Rate) and A (Fitch Chile).
| Feature | AH series bond |
|---|---|
| Issuer | Celulosa Arauco y Constitución S.A. |
| Amount placed | UF 10,000,000 |
| Placement rate | UF+4.13% |
| Coupon | 3.75% a year until Dec 7, 2033 |
| Maturity | December 7, 2058 (bullet) |
| Early redemption | From September 7, 2033 |
| Rating | A+ (Feller Rate), A (Fitch Chile) |
| Use of proceeds | 100% general corporate purposes |
| Placement agent | Santander Corredores de Bolsa |
Sources: Arauco material-event filing, via Diario Estrategia; Diario Financiero. Peso equivalent at the November 6, 2026 UF (CLP 41,280).
What a hybrid bond is and why companies issue them
A hybrid bond is debt with equity features. In Arauco's case, three characteristics explain it, according to the filing: it is subordinated, meaning it is paid after other financial obligations if the company runs into trouble; the company can defer interest payments at its discretion, although while interest is deferred it cannot pay dividends; and it has a very long term, 32 years. That is why rating agencies may treat up to 50% of the amount as equity ("equity credit"), which improves leverage ratios without issuing new shares or diluting shareholders.
- For the company: long-term financing that rating agencies partly treat as equity.
- For the investor: a higher rate than a regular bond from the same issuer, in exchange for more risk (subordination and interest that can be deferred).
- For shareholders: if interest is deferred, there are no dividends until it is caught up.
The usual buyers of these securities in Chile are institutional investors, such as life insurers, pension fund managers and investment funds, looking for long cash flows in UF. Individuals can have indirect exposure through a fixed-income mutual fund or their pension fund; in our mutual funds guide we explain how they work.
Is your company issuing debt or seeking investors? Reach them with Pauta Financiera.
See advertising optionsWhy Arauco waited for rates to fall
The placement was scheduled for October 1 but was postponed because of rising long-term rates in the United States. Waiting paid off: since early October, the 10-year US Treasury yield has fallen about 40 basis points and the yield on 10-year Chilean Treasury bonds in UF more than 20 basis points, according to Diario Financiero. The result was a rate 37 basis points lower than the registration rate. Arauco's first hybrid bond, in October 2025, was placed at a spread somewhat wider than this time's 163 basis points.
- Oct 2025Arauco's first hybrid bond
- Sep 4, 2026The board approves the issue
- Sep 16, 2026The CMF registers line No. 1277
- Oct 1, 2026Placement postponed due to rising rates
- Nov 2026UF 10 million placed at UF+4.13%
- Dec 7, 2026First interest payment
- Sep 7, 2033First possible call date
- Dec 7, 2058Maturity
On the same day, Arauco's board approved its dividend policy: it will distribute 30% of 2026 distributable earnings and 40% of those in subsequent years, with interim dividends if a profitable year is expected and cash allows. The bond proceeds will go 100% to general corporate purposes. The company is building the Sucuriú pulp mill in Brazil, 81.1% complete and due to start up in the fourth quarter of 2027, according to Diario Financiero. We reviewed its third-quarter results in our article on CMPC and Arauco.
The placement comes at a calmer moment for markets: the peso is appreciating and the IPSA is rebounding, as we report in today's dollar and stock market summary. This information is journalistic and is not investment advice.
Frequently asked questions about Arauco's hybrid bond
How much did Arauco place in hybrid bonds?
UF 10 million, about US$425 million, at a UF+4.13% rate.
What is a hybrid bond?
Subordinated, very long-term debt whose interest can be deferred, so rating agencies count it partly as equity.
When does Arauco's AH series bond mature?
On December 7, 2058, although Arauco can call it from September 7, 2033.
