Steinhoff bonds drop after Moody’s downgrade; EM primary quiets; market eyes Fed news

By Rebecca Melvin

New York, Dec. 8 – Steinhoff International Holdings NV bonds saw further spread widening on Friday as the price languished in the mid-50s after Moody’s Investors Service downgraded its ratings on the South African retailer including the Steinhoff Europe AG senior unsecured notes.

Moody’s cut the ratings four notches to B1 from Baa3 and put the company’s ratings under review for further downgrade, citing liquidity and debt capital structure concerns arising from news this week that the chief executive stepped down amid further accounting irregularities requiring investigation.

Moody’s said that given allegations of accounting irregularities raised and rebutted in August and November, the quality of oversight and governance at Steinhoff has been called into question.

The Steinhoff 1 7/8% notes due 2025, of which €800 million priced in July, saw spreads blow out about 130 basis points. The bond price fell to 55 from 84 on Wednesday.

Elsewhere, emerging market credit quieted down after a busy week of new issuance, with no new deals added to the calendar in Latin America or the Central & Eastern Europe Middle East and Africa. There were new deals for the calendar for Asia however.

There is a deal on the calendar for Monday’s business from Alpha Holding SA de CV. “You may see one or two more deals get done before the Fed, but after the Fed everyone is going to be shutting down for the holidays,” a New York-based syndicate source said.

The U.S. Federal Open Market Committee is meeting next Wednesday for the last time this year and is expected to raise its benchmark fed funds rate one more time for a complement of three increases this year.

Meanwhile a strong U.S. payrolls report for November on Friday, which saw an addition of 228,000 jobs and the unemployment rate hold steady at 4.1% was not expected to cause any shifting of deal pipeline plans, the syndicate source said.

The fundamental and technical picture in emerging market credit is already strong. Most key benchmark indices have outperformed this year. This week’s economic news would not have caused anyone to move up their plans to issue new debt or vice versa. Most sovereigns are already on hold for issuance until the first quarter, with any remaining deals that trickle though expected to be coming from corporate issuers.

But while the economic picture looks solid, it is not necessarily all smooth sailing next year as investors eye the wind-down of QE programs and elections slated for a number of emerging markets countries for 2018.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.