15 de septiembre de 2015 / 18:44 / en 2 años

LATAM WRAP-Investors see value as Brazilian credits sink

NEW YORK, Sept 15 (IFR) - Some investors are spying opportunities in Brazil even as the country’s bond markets sink lower following S&P’s decision last week to demote the sovereign and Petrobras to junk.

“(One of) our biggest overweights is in Brazil,” Michael Cornelius, EM portfolio manager at T. Rowe Price, told reporters in New York on Tuesday.

The asset manager remains overweight Petrobras, the state-owned oil company at the center of a far-reaching corruption scandal whose bonds have suffered dramatic price swings this year.

Petrobras’s debt took another leg down in recent days after S&P gave it a second junk rating following Moody’s decision in February to cut it to Ba2.

Indeed, the company is no longer being traded as a high-grade credit, and for the first time today was being quoted with dollar prices rather than on a spread basis.

Its 2024s widened all the way to 800bp over Treasuries on Monday, but were essentially flat in price terms today at around 78.25-79.00. “Petrobras is singularly focused on deleveraging and we like that,” said Cornelius.

He has also switched to a neutral position on Brazil sovereign debt. “We were underweight but it has gotten too cheap with the downgrade,” he said.

The forced selling of Petrobras bonds among passive high-grade accounts as the issuer drops out of investment-grade indices is expected to become more widespread as other Brazilian corporates downgraded.

EM investors are expected to eventually take up the slack, but the recycling is likely to take some time.

One trader said some investors were switching exposure from Brazil to high-quality names in countries like Mexico. “We are waiting to see how the index guys react,” he said.

Meanwhile, announcements of more austerity measures in Brazil, including a reduction in the number of ministries, have done little to turn sentiment.

“The market wants to see action (and is) no longer satisfied with promises anymore,” said Klaus Spielkamp, head of fixed-income sales at Bulltick.

Instead focus remains squarely on Brazilian names with dollar debt and local revenues. Arcos Dorados, the regional operator and franchisee of McDonald‘s, is the latest such credit to be in the firing line, with its 2023s dropping about a point today to 88.00-89.00.

“Brazil represents about 50% of their income, which is expected to be much less because of the weakening of the Real and the recession in Brazil,” Spielkamp said.


The Province of Neuquen, the third largest oil-producing and the largest gas-producing province in Argentina, has mandated Deutsche Bank and J.P. Morgan to arrange a series of fixed income investor meetings commencing on Wednesday, 16th of September.

A USD-denominated 144A/RegS senior secured capital market transaction (secured by gas royalties) may follow, subject to market conditions.

Panama’s Canal Authority (ACP) will kick off investor meetings next week through Bank of America Merrill Lynch as it looks to market a US dollar 144A/Reg S bond.

ACP, the entity in charge of the operation and expansion of the Panama Canal, is in Los Angeles today, Chicago on September 16, New York on September 17 and Boston on September 18. Roadshows end on September 21 in London. The issuer is rated A2/A-/A.

Mexican real-estate investment trust Fibra Uno has wrapped up meetings with fixed-income investors through Bank of America, Credit Suisse, HSBC and Santander.

Terrafina, another Mexican REIT, has also finished meeting accounts as it markets a potential US$400m-$500m bond offering. The borrower has mandated Barclays and Citigroup as lead managers, with Itau coming in as co-manager. Expected ratings are Baa3/BBB-. Both REITs could tap the market this week. (Reporting by Paul Kilby; Editing by Natalie Harrison)

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