May 3, 2016 / 9:27 PM / 2 years ago

Odebrecht bonds sink on delayed results

NEW YORK, May 3 (IFR) - Bonds issued by Brazil’s Odebrecht plummeted on Tuesday after it delayed the release of financial results amid questions about the impact of a corruption probe on its books.

One New York-based trader described “panic” selling among holders of the company’s debt, noting that news of the postponed results was “unexpected.”

The 7.125% 2042s and the 4.375% 2025s sunk about 4.5 points on Tuesday to close respectively at 31.25-32.75 and 30.25-31.75, putting them well into distressed territory.

The construction conglomerate told bondholders about the postponed results after auditors requested further information about the accounting implications from the so-called Car Wash bribery scandal, Reuters reported on Tuesday.

The news prompted Fitch on Tuesday to downgrade about US$1.3bn of bonds issued by Odebrecht Finance to B+ from BB.

The rating agency, which also put the company on negative watch, cited the risks of a possible debt payment acceleration as a result of delayed financial statements.

“The negative watch reflects (Odebrecht’s) challenges to mitigate vulnerabilities due to the publishing delay of its 2015 financial statements, with potential debt payment acceleration of US$2.7bn,” it said.

Fitch followed S&P’s decision late Monday to also demote Odebrecht Engenharia e Construcao to B+ from BB- with a watch negative.

S&P has yet to incorporate a debt acceleration into its base-case scenario, but underscored heightened liquidity risks for the credit.

Several Odebrecht subsidiaries have already begun negotiations with creditors to refinance up to R$35bn (US$9.8bn) of loans as funding options narrow in the wake of corruption probe, according to Reuters. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)

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