NEW YORK, March 18 (IFR) - LatAm credit markets were off to a mixed start Wednesday as investors squared positions ahead of the FOMC statement later in the day.
In the absence of any strong trading activity, spreads were largely drifting wider as crude prices fell again this morning while US Treasuries extended recent gains.
One of the few exceptions was Brazil’s state-controlled oil company Petrobras, whose curve is opening some 10bp tighter after another day of dramatic widening Tuesday.
Its 2016s, 2024s and 2044s were being quoted at 750bp, 596bp and 575bp, respectively.
“Yesterday some of their bonds widened 80bp, so if they come in 10bp it makes sense,” said a New York-based trader.
Elsewhere in the oil space, Pacific Rubiales’s bonds were being marked down following a tumble this week after it decided not to extend a contract to develop its Rubiales field in Colombia.
News this morning that the company would suspend dividend payments and had agreed to relax terms on its debt did little to help bond prices.
“(The news) isn’t offsetting weakness elsewhere,” said another trader.
“I would mark their bonds lower today but not by much. By cutting dividends they are showing some sensitivity to bondholders, but it is the credit metrics that people are watching.”
The 2019s and 2021s were being quoted about 3/8 of a point lower at 62.00-63.00, while the 2023s and 2025s were about a quarter of a point weaker at 54.75-55.75.
Pacific Rubiales said it had relaxed covenants on a revolving credit facility to allow for 4.5x 12-month trailing debt-to-adjusted Ebitda, drawing on the facility to repay short-term bank debt maturing this year and next.
The remaining US$500m-plus in proceeds was left on the balance sheet as a buffer against further drops in crude prices.
The company also pointed out that its debt-leverage ratio remains below its bond incurrence covenants of 3.5x 12-month trailing debt-to-adjusted Ebitda.
This comes as Brent fell below US$53 today, while US crude hit a six-year low at US$42.05 before bouncing back to US$42.21.
On the sovereign side, Argentina was putting in a mixed performance after Reuters reported that the government had filed a motion in US courts to oppose “me too” claims by bondholders seeking payment on some US$5.4bn of debt.
Boden 2015s and Bonar 2024s were a touch higher at 103.00-103.50 and 105.00-105.50, but US dollar discounts had dropped about 50ct to hit 102.50-103.00.
Meanwhile Venezuelan debt was taking a hit on the back of weaker crude, with the 2022s being quoted at 42.25-43.25.
Colombia Telecomunicaciones (ColTel), Colombia’s second-largest telecommunications company, has hired BBVA and HSBC as structuring advisors and joint bookrunners and Citigroup and Credit Suisse as joint bookrunners to arrange a series of investor meetings in the US, Europe and Asia.
A US dollar-denominated 144A/Reg S hybrid bond transaction may follow. The issuer is rated BB/BB, while the hybrid bond is expected to be rated B+/B. ColTel is 70% owned by Spain’s Telefonica S.A. and 30% owned by the Republic of Colombia. Meetings kicked off yesterday and continue until March 24.
The Republic of Peru (A3/BBB+/BBB+) has hired BBVA, Deutsche Bank and Morgan Stanley to arrange meetings with fixed-income investors. The sovereign will wrap up roadshows in Boston on Wednesday.
Ecuador is expected to come to market with a new US dollar-denominated bond as soon as this week through lead Citigroup.
Peruvian state-controlled mortgage bank Fondo Mivivienda, rated BBB+ by both S&P and Fitch, wrapped up investor meetings this week through leads Deutsche Bank and JP Morgan.
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. (Reporting by Paul Kilby; Editing by Marc Carnegie)