NEW YORK, June 22 (IFR) - A rally in beef producer Marfrig’s bonds bucked the trend Monday in Brazil, where corporates remained under pressure following the arrest of Odebrecht’s CEO last week.
Odebrecht bonds suffered another day of price swings amid speculation about the impact of the arrest in connection with the kickback investigation at Petrobras.
Illiquidity in the market exacerbated price movements as investors sought to gain from dramatic price drops in the bonds, said one trader.
“Clearly someone was pushing down Odebrecht bonds,” he said. “It is easy to push them down, as no one is going to lift you.”
But Odebrecht bonds were off their lows by early afternoon, with the 2029s being quoted at 79.00.
It was a similar story with Odebrecht bonds backed by drillships on charter to Petrobras, with the 6.625% 2022s seen in the low to mid 70s after closing Friday around 78.00-79.
The arrest at Brazil’s largest construction firm has reignited concerns about the so-called “Car Wash” scandal - and the possible involvement of other top executives and politicians.
Despite such worries, Brazilian beef name Marfrig saw its bonds rally on Monday as investors cheered the deleveraging potential behind its sale of UK subsidiary Moy Park.
Marfrig bonds leapt this morning following yesterday’s announcement that it would sell Moy Park to larger rival JBS in a transaction valued at US$1.5bn comprising a cash payment of US$1.19bn and GBP200m of net debt.
The sale is seen as credit positive as it will allow the company to deleverage further and eliminate the uncertainty over how Marfrig would monetize an asset that it had been expected to spin off.
Marfrig’s 2019s and 2020s, rated B+/B+/B2, were respectively being quoted on Monday morning at around 94.00-95.00 and 102.50-103.50.
That marked an up to five-point jump from the 90.50 and 98.00 mid-market prices being quoted on Friday, but really only puts them back close to levels seen in mid-May.
“People had been getting increasingly pessimistic about margins,” one banker told IFR.
Elsewhere, recently minted bonds continued to enjoy a decent bid.
Salvadoran bank Agricola’s new 6.75% 2020s and AES Panama’s 6% 2022s were up a good point since pricing earlier this month. They were seen at mid-market prices around 102.00 and 101.50, respectively.
Grupo Posadas is on the road through Citigroup, Bank of America Merrill Lynch and JP Morgan ahead of a possible USD 144A/Reg S bond sale.
The company, rated B2/B/B+ by Moody‘s/S&P/Fitch, saw accounts in London today and will head to Boston on Tuesday and New York on Wednesday.
The Government of Aruba, rated BBB+ by S&P and BBB- by Fitch (both stable), has mandated Credit Suisse and Raiffeisen Schweiz to lead a roadshow in Switzerland this week.
The Caribbean island is a part of the Kingdom of the Netherlands. The deal is “supervised” by the Netherlands but does not have an explicit guarantee.
Jamaica has started investor meetings via Citigroup. The country, rated Caa2/B/B-, saw accounts in London today and will head to Germany on Tuesday and wind up in Amsterdam on Wednesday.
Meetings are being described as a non-deal roadshow, but markets have been expecting the sovereign to raise funding to retire a PetroCaribe loan owed to Venezuela. (Reporting by Paul Kilby; Editing by Marc Carnegie)