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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.
Brazil 2025s were spotted earlier at 97.15-97.65.
Many Brazilian corporates have bounced off last month's lows ahead of a string of corporate earnings this week.
"People are starting to focus on relative value and you have seen some of the names that have been beaten up coming back," said a senior banker.
This is particularly true of credits or industries with little or no connection to the ongoing investigation into kick-backs at Petrobras.
Beef company Marfrig has seen its bonds climb in the wake of its results this week.
Marfrig's 2019s were trading at around 90.50-91.00 today, up from the recent low of 83.50 in early February.
It was a similar story for the 2020s, which were quoted at 96.50-97.00, marking a good six-point climb since mid-February but still south of the 108.00 level seen in September last year.
"Their numbers are symptomatic of a lot of (Brazilian companies)," the banker said. "The FX depreciation hit their leverage right away, and will only benefit exports over time."
Elsewhere, Colombian state-owned oil company Ecopetrol was starting the day about a one point weaker after the state-owed oil company reported a 42.7% drop in net profits due to lower crude prices. The 2023s were quoted this morning at 107.50.
In the sovereign space, Argentina assets were taking a breather from recent price rises ahead of a hearing in a US court today to discuss whether or not payments should be allowed on some Argentina law US dollar bonds.
"It is a good opportunity to take some profits," said a Miami-based trader.
Boden 2015s were being quoted at 101.75-102.25, while Bonar 2024s were being spotted at 105.00-105.00.
Mexican telco America Movil is soon expected to reopen its Global peso-denominated bond due 2024 for up to MXN7.5bn (US$502.5m) after filing with Mexican regulators today, according to a Moody's note.
Proceeds form the sale will be used primarily for debt refinancing as well as for general corporate purposes.
Th company wrapped up meetings with investors in Europe and the US last week via BBVA, Citigroup, Credit Suisse, Deutsche Bank, HSBC and Morgan Stanley.
Mexican media company TV Azteca is bringing to market a rare project bond related to the development of the Andean country's fiber optic network.
Costa Rica has chosen Deutsche Bank and HSBC as lead managers on an up to US$1bn international bond sale.
Panama filed with the SEC to sell up to US$3.04bn in debt, raising expectations that the sovereign could soon come to the international bond market. (Reporting by Paul Kilby; Editing by Marc Carnegie)