Petrobras tightens as Brazilian sovereign slips
By Paul Kilby
NEW YORK, March 3 (IFR) - Latin American sovereigns were on a weaker footing Tuesday morning but Petrobras bonds rallied on news the highly leveraged Brazilian oil entity plans to shed US$13.7bn of assets.
The company's bonds were 30-40bp tighter, with the 2024s and the 2044s being quoted at 519bp-503bp and 526bp-516bp.
Investors have largely responded well to new CEO Aldemir Bendine and his management team, who have been working to restore confidence in a credit that just last week saw Moody's downgrade it to junk at Ba2.
Petrobras announced yesterday that the board had agreed to a two-year divestment planning involving a US$13.7 asset sale.
"This plan is part of Petrobras's financial planning aimed at reducing leverage, preserving cash and focusing on priority investments, mainly oil and gas production in Brazil in areas of high productivity and return," it said in a statement.
Implicit government support for what is seen as a strategic asset has brought some comfort to investors who see opportunities along a curve offering yields of low to high 7%.
"The asset sales - and now the government appears to be making a big effort to rescue Petrobras and the construction companies - so people are selling the sovereign to buy the corporates," said a New York-based trader.
This comes as prices on Brazilian sovereign paper slip in the secondary alongside US Treasuries, which are under pressure today due to heavy supply in the US high-grade market. Continuación...