28 de enero de 2016 / 20:25 / en 2 años

Fall in Odebrecht bonds baffles traders

NEW YORK, Jan 28 (IFR) - Traders were scratching their heads on Thursday about a multi-point drop this week in bonds issued by Brazilian construction Odebrecht.

The company’s 5.25% 2029s were being quoted at a mid-market price of around 40 cents on the dollar, marking a four point drop on the week.

It is a similar story for bonds across the issuer’s curve, which were seen this week in the high 30s and low 40s.

The company’s debt has suffered considerable price swings since CEO Marcelo Odebrecht was arrested in June last year on charges that the family-run conglomerate spearheaded a bribery scheme at oil company Petrobras.

While the widening corruption scandal has kept the market on tenterhooks, traders say, no recent news justifies the steep fall in Odebrecht prices.

“Somebody knows something and is selling,” said a US based-trader.

Prices may have come under pressure as investors dumped Brazilian assets in a “guilt by association” trade following news this week that police were carrying out raids at OAS, another construction firm, said analysts at Jefferies.

“I thought Odebrecht was bigger than Marcelo Odebrecht,” said Klaus Spielkamp, head of fixed-income sales at Bulltick.

“But I guess any new chapter in the (scandal) brings more concerns.”

Jefferies analysts wrote on Thursday that they remained cautious about a credit that needs to win more and larger contracts to keep its backlog of projects at comfortable levels.

“It is possible the company is finding it increasingly difficult to acquire the financing it needs to successfully bid on projects,” the bank said.

Brazil’s largest construction company still enjoys a decent cash cushion, low leverage and a strong track record, but its financial performance this year will make or break sentiment towards the credit, Jefferies said. (Reporting by Paul Kilby; Editing by Marc Carnegie)

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