NEW YORK, June 1 (IFR) - Petrobras stole the show on Monday with a US$2.5bn Century bond that proved it once again had market access and paved the path for potentially more debt issuance by the embattled oil company later in the year.
The deal stunned market participants as the company, still reeling from a widespread corruption investigation, was not thought to be ready to come back to the global bond markets.
"It took the whole market by surprise," said a New York based trader, who was bidding the new bond at plus 1.5 points in the grey market by late afternoon.
"No one thought they would do it. They can now come with a multi-tranche deal without leaving much money on the table."
Launched at a final yield 8.45%, the Century bond came 40bp inside initial price thoughts of 8.85% area and at the tight end guidance of 8.55% area (plus/minus 10bp) on the back of a multi-billion book.
Those levels, not to mention an expected discounted dollar price of around 80, looked attractive, offering a 110bp pick up to the 30-year section of its curve.
Thought to have been supported by anchor orders, the deal was heard to have lured pension funds and insurance companies which need to match long-term liabilities with similarly dated assets.
The solid response to Petrobras's latest bond came even as much of the Brazilian bond complex suffered some weakening after US Treasury yields climbed to one-week highs Monday following the release of solid US manufacturing and construction data.
Petrobras 2024s were closing some 7bp wider at 425bp-420bp, as were some of the longer-dated securities by Votorantim, Gerdau and Braskem.
Still despite the rush of demand for the paper, some investors were more cautious about the credit, which is rated Ba2/BBB-/BBB-, and the 100-year bond.
They pointed to duration risk given that a much expected hike in US rates would likely hurt longer dated instruments.
Already downgraded to junk by Moody's, the company's bonds could also suffer from further volatility should S&P and Fitch ever decide to demote the credit in a similar manner, they said.
"All the good news is already out," said Jorge Piedrahita, CEO of broker Torino Capital. "There are risks of downgrades down the road."
Meanwhile, Brazilian media company Globo also saw the opportunity to issue a rare bond 10-year as it sought to exercise the call on US$325m step-up perpetual notes.
The 10-year bond was priced at par to yield 4.843% or US Treasuries plus 265bp, the tight end of guidance of plus 270bp(plus/minus 5bp) and inside talk of high 200s. Book reached close to a US$1bn on the US$325m trade.
Lima Metro Line 2 Finance Limited, a company established by a consortium of Peruvian and European sponsors, has selected banks to take it on global roadshow ahead of a potential 144A/RegS USD bond sale of US$1.14bn of senior secured notes.
The issuer will meet accounts in New York on June 3, in Boston and London on June 4, in Los Angeles and London on June 5, leaving June 8 free for investor calls. Citigroup, Morgan Stanley and Santander have been mandated as global coordinators for a potential senior secured bond, which is expected to be rated Baa1/BBB/BBB.
As part of the transaction, Lima Metro Line 2 will purchase unconditional and irrevocable payment obligations of the Government of Peru, acting through the Ministry of Transport and Communications.
The consortium that won the bid to build the metro line comprises a number of European and Peruvian sponsors, including Iridium (a subsidiary of ACS Group), Vialia (a subsidiary of FCC), Salini Impreglio, Ansaldo STS, AnsaldoBreda, and Cosapi.
LatAm Airlines is marketing a potential senior unsecured bond offering. The company will wrap up roadshows in New York on Tuesday, 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.
Mexico's Comision Federal de Electricidad (CFE) has selected BBVA, Bank of America Merrill Lynch, Citigroup, Goldman Sachs, HSBC, Morgan Stanley and Scotiabank to organize the fixed-income investor meetings.
The borrower, rated Baa1/BBB+/BBB+, was in London today and will head to Boston on June 2 and New York on June 3.
Brazilian aircraft manufacturer Embraer, rated Baa3/BBB, has mandated Citigroup and Morgan Stanley to meet fixed-income investors ahead of a potential SEC registered bond offering.
The company was in Boston and Chicago today and will head to New York on June 2. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)