NEW YORK, May 6 (IFR) - Prices on bonds issued by Pacific Rubiales, Colombia's largest private oil producer, have soared in the secondary market after Mexican conglomerate Alfa and Harbour Energy said they had agreed to buy the company for about US$5bn equivalent.
The company's 5.625% 2025s were being quoted at around 86.00-88.00 on Wednesday, up from around 72.00 before the news moved bond prices higher late Tuesday. Those bonds were trading as low as 57.00 in mid-March.
Pacific Rubiales said late yesterday that it had entered into exclusive discussions with Alfa and Harbour Energy whereby they would acquire all common shares not already owned by the Mexican conglomerate.
The deal is being valued at around C$6bn (US$4.97bn), including debt, according to Reuters citing a person familiar with the matter.
Alfa holds close to 60m common shares or about 18.95% of the issued and outstanding common shares. The acquisition is still subject to a number of conditions, including board approvals.
The Toronto-based Pacific Rubiales has watched bond prices tumble this year as investors fretted over possible covenant breaches and rising leverage in the face of declining crude prices.
In December, an announcement of a joint venture between Pacific Rubiales and Alfa dashed hopes that a full take-over would ever take place. But the waiting has paid off for the Mexican conglomerate, which has agreed to pay C$6 per share for Pacific Rubiales.
That's considerably less that the C$21 per share it paid in August when it upped its stake in the company to 17%. "I guess they were waiting to make a cheaper offer," said Klaus Spielkamp, head of fixed-income sales at Bulltick in Miami.
"We always thought the market wasn't pricing in the possibility that Alfa would buy control of Pacific Rubiales. Alfa needs an operator if it wants to participate in energy auctions in Mexico."
Traders have been reporting some profit-taking on the news but many expect the bonds to move higher in coming months. Spielkamp reckons that yields on Pacific Rubiales bond could tighten in line with Alfa's autopart subsidiary Nemak, which has outstanding 2023s trading at a yield of around 4%.
"Nemak is double B and belongs to Alfa and I believe that is where Pacific Rubiales will trade," Spielkamp said.
Reporting By Paul Kilby; editing by Shankar Ramakrishnan