NEW YORK, May 28 (IFR) - Weaker equities, currencies and crude prices made for a shaky backdrop in Latin America's credit markets on Thursday as investors to took profits and sent spreads wider.
Traders have been reporting the emergence of a few bottom fishers as prices become cheaper, but overall the buyside remain wary of deteriorating fundamentals amid weaker commodity prices.
Risk appetite was on the wane Thursday amid ongoing worries about the outcome of Greek debt negotiations and a sharp drop in Chinese stock prices earlier in the day.
And with US Treasuries holding steady - the yield on the 10-year bond was essentially flat at around 2.13% - spreads are trending wider as debt prices fall.
"We have been weak all week and there has been a lot of profit taking," said a New York based trader who thought the market had been overbought.
Brazilian oil company Petrobras's 2024s were some 8bp wider at 420bp-410bp, while miner Vale 2022s were weaker by about 5bp at 255bp-245bp.
Crude ended higher on Thursday but trading was choppy as the dollar made further gains and local currencies such as the Brazilian Real suffered further losses.
The Real was back up at 3.16 against the dollar Thursday, while the sovereign's 2025s were also weaker at a mid-market price of 98.75.
Yet despite rockier conditions, Brazilian corporates continue to move forward with bond sales. Food company BRF announced today that it would price a euro-denominated seven-year bond as soon as Friday, while aircraft manufacturer Embraer will soon kick off roadshows.
Meanwhile hopes that the sovereign would soon set a new pricing benchmark are quickly evaporating after the country's treasury chief was quoted saying Thursday that conditions had not yet improved enough to sell bonds in the international markets.
In the corporate space, bonds backed by drillships and on charter to Petrobras also continued to sink.
Odebrecht's 6.75% 2022s were down about half a point at 89.75-90.75, while Schahin's 2023s were hovering around 49.00 following Fitch's decision to downgrade the notes to CC from B- on Wednesday. The move reflects the termination of the Petrobras charter agreements with the company, the agency said.
Schahin said in a statement that the cancellation of such contracts could result in US$4bn of losses for creditors and shareholders and that it plans to contest the state-own oil company's decision in court.
LatAm Airlines marketing a potential senior unsecured bond offering and to tender for TAM's 9.50% 2020s. The company was in Boston on Thursday and will head to Los Angeles on May 29. The following week it will be in New York on June 1 and 2, leaving June 3 open for conference calls.
Ratings are Ba2/BB/BB- by Moody's, S&P and Fitch. The deal is being done in conjunction with a tender offer and consent solicitation for US$300m in outstanding 9.50% 2020s issued by TAM.
Citigroup and JP Morgan are acting as global coordinators as well as joint bookrunners along with Bank of America Merrill Lynch, BTG Pactual, Credit Agricole and Santander.
Goldman Sachs is looking to bundle debt backing three of Colombia's 4G highway projects and sell it as an up to US$500m 144A bond in the US markets as early as July.
Mario Alberto Huertas, the local construction company that won the highway concessions, has appointed Goldman Sachs as global co-ordinator and lead arranger for the financing efforts. It has also retained local bank Structure Banca de Inversion as financial adviser.
Mexico's Comision Federal de Electricidad (CFE) has hired a string of banks to take it on the road to meet fixed-income investors. The state-owned power company has selected BBVA, Bank of America Merrill Lynch, Citigroup, Goldman Sachs, HSBC, Morgan Stanley and Scotiabank to organize the meetings.
The borrower, rated Baa1/BBB+/BBB+, will head to Los Angeles on May 29, London on June 1, Boston on June 2 and New York on June 3. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)