NEW YORK, April 8 (IFR) - Latin American credits are seeing another firm start Wednesday as Mexico prepares to price EM’s first-ever Century bond denominated in euros.
Brazilian banks, which had lagged earlier rallies, are proving to be the outperformers, with Banco do Brasil’s 9% perps up another half a point this morning at 91.75-92.50 after a stellar climb over the last few weeks.
“The market is still firm and we are still seeing buying interest in the market,” said a trader.
Bonds issued by Brazilian state-owned oil entity Petrobras are largely drifting amid some profit taking, but remain some 1-2bp tighter in spreads terms. The company’s 2024s and 2044s are being quoted at 487bp-485bp and 495bp-485bp, respectively.
Meanwhile, troubled oil services company Schahin is also watching its 2022s recover a touch to hit 42.00-44.00 after plummeting about 20 points over the last few days on unconfirmed media reports that it was about to file for bankruptcy. Schahin declined to comment on the reports.
The latest price move comes despite S&P downgrading Schahin Oil & Gas Wednesday to CCC- from B- and warning that a possible default was on the horizon.
“The downgrade reflects our belief that without an unforeseen positive development in the next six months Schahin is likely to default,” S&P noted.
The company has been trying to extend its maturity profile ahead of a US$460m loan payment due in October, but S&P warns that its funding options are shrinking during a tough time for the oil sector and a temporary ban on sister company Schahin Engenharia from doing business with Petrobras.
The downgrade was largely expected and it only takes one buyer to bid up the price in an illiquid market, noted one trader, explaining the price action in the bonds.
Elsewhere, Argentina debt continues to move higher despite yesterday’s decision by a US court to reject the government’s appeal of an early contempt ruling. The country’s Bonar 2024s are now back at around 107.375 mid market, falling as low as 104.00 last week.
In the primary market, Mexico has set a final yield of 4.20% on a EUR1.5bn Century bond, marking a first for an EM issuer. Pricing is expected later today through leads Goldman Sachs and HSBC.
BBVA Colombia has hired BBVA Securities and Morgan Stanley to arrange a series of fixed-income investor meetings in the US and London ahead of a potential US dollar-denominated Tier 2 subordinated bond offering.
The meetings will take place in Los Angeles on April 10, London on April 13, Boston on April 14 and New York on April 15. A 144A/Reg S issue may follow. BBVA Colomnbia is rated Baa2/BBB+ by Moody‘s/Fitch at the senior level, while the Tier 2 issue is expected to be rated Baa3/BBB.
Pacific Rubiales, the largest private oil producer in Colombia, hired Bank of America Merrill Lynch, Citigroup and HSBC to arrange a series of investor update meetings in the US, Europe and Latin America between April 8 and May 6.
The meetings will take place in London on April 8 and 9, Switzerland on April 10, New York on April 13 and 14, Boston on April 15, Santiago on April 30, Los Angeles on May 4 and Miami on May 6. (Reporting By Paul Kilby; Editing by Sudip Roy)