NEW YORK, June 30 (IFR) - Petrobras’s bonds were 4-5bp tighter on Tuesday after the embattled Brazilian oil company unveiled an ambitious deleveraging plan yesterday.
The plan called for an aggressive cut in capex as management looked to turn around one of the world’s most indebted companies and one that has been embroiled in a highly publicized corruption scandal.
The company’s 2024s and Century bonds were well bid earlier today and were quoted at 445bp-435bp and 526-521bp.
Credit markets largely cheered the management’s intention to slash net leverage to below 3.0x by 2018 and to 2.5x by 2020 - down from the 4.8x seen last year - but remained skeptical about its ability to achieve such goals.
Improving leverage ratios depend to a large extent on an ambitious US$58bn divestment plan between now and 2018, which essentially equates to US$15bn in asset sales a year.
Analysts think that may be hard to achieve. There have only been three instances, where oil companies have successfully carried out divestment plans at that pace, said Credit Suisse analyst.
“It will be interesting to see the reaction of rating agencies to the plan, especially since at least Fitch doesn’t seem to believe asset sales can be relied upon as the only source for debt reduction,” wrote Omar Zeolla, an analyst at Oppenheimer.
Moody’s noted on Tuesday the company moved more aggressively than they had expected in terms of capex cuts and deleveraging, but said that execution risks remain high partly because of the size of assets up for sale.
Elsewhere, LatAm credit were inching tighter but liquidity was sparse as accounts awaited for the outcome of Greece’s referendum on Sunday and cast a wary eye on China, where the government has moved to loosen monetary policy and support a wobbly stock market.
“This is a tough week to take additional risk,” said Klaus Spielkamp, head of fixed-income sales at Bulltick. “We have a short week, non-farm payrolls on Thursday and the Greek referendum.”
Peruvian development bank Corporacion Financiera de Desarrollo SA (COFIDE) has mandated Citigroup, Morgan Stanley and Standard Chartered to roadshow a possible US dollar 144A/RegS bond sale.
The borrower, rated BBB+/BBB+, wrapped up in New York on June 30.
Banco Santander Chile has mandated Deutsche Bank and Santander to arrange global fixed-income investor meetings to discuss opportunities in the domestic Chilean markets.
The bank, rated Aa3/A/A+, will be in London on July 6, in Boston on July 7, in New York and nearby on July 8 and 9, finishing up in Los Angeles on July 10.
Jamaica, rated Caa2/B/B-, has wrapped up roadshows via Citigroup. The meetings were 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 Shankar Ramakrishnan)