NEW YORK, Nov 12 (IFR) - Concerns about weaker commodity prices were largely driving price action in Latin American debt markets on Thursday as investors started to lock in profits before year end.
Oil names continued to sink Thursday after crude hit a two and a half month low amid heightened supply concerns following data showing higher-than-expected stock piles in the US.
The 2024s issued by state-controlled Petrobras were trading about half a point lower at 80.25, while Mexican oil firm Pemex was also suffering some spread widening on Thursday.
This comes despite news that Pemex management had cut a deal with its union to lower pension benefits, allowing it to pass along billions of dollars of unfunded liabilities to the government.
The move provides some relief to a company that reported steep losses during the third quarter following this year's sharp decline in oil prices.
"Pemex was looking to open 2-3bp tighter, but we are now seeing 4bp wider," said a New York-based trader. "(But the pension agreement) should bode well for the compression of Pemex spreads against the sovereign."
Pemex 2024s were trading at 293bp over US Treasuries, wide to the 274bp seen just last week, but still far off its all-time high of 360bp on September 30, according to Thomson Reuters data.
Meanwhile, bonds issued by Samarco, the iron ore miner jointly owned by BHP Billiton and Vale, moved up slightly to 61-62 on Thursday.
This comes after the company's debt suffered multi-point drops earlier this week following the bursting of two dams operated by the company.
"(The rebound in Samarco prices) is technical more than fundamental," said a second trader. "It is just a lack of selling."
Risk insurance is insufficient to cover the costs of the clean up and the start-up of operations, wrote a Gimme Credit analyst in a report today.
The company has about R$2.2bn in cash which should cover debt maturities until 2017, but there is a risk of triggering maintenance covenants that limit net leverage at 3.0x, it said.
Meanwhile, the primary market remained in the doldrums as borrowers awaited better market conditions.
"We need to see some stability before issuers come," said the first trader. "The delay of the Tanner deal may not have been important for our market but the failure of a blue-chip (name) would not be good."
Mexican white-goods manufacturer Controladora Mabe has finished investor meetings through Barclays, Bank of America Merrill Lynch, Citigroup and JP Morgan. Ratings are BB+/BB+.
Mexican REIT Fibra Uno completed meetings with investors through Bank of America, Credit Suisse, HSBC and Santander.
Brazilian airline GOL Linhas Aereas Inteligentes (B3/B-/B-) completed roadshows with Morgan Stanley, Credit Suisse and Citigroup. (Reporting By Paul Kilby)