Venezuela trades lower on S&P ratings downgrade; Tarjeta Naranja plans tap of 2017 notes

By Paul A. Harris

Portland, Ore., Aug. 22 - Apart from Venezuelan sovereigns, emerging markets were generally a little better bid on Monday, with modest buying, according to a trader on the East Coast of the United States.

Venezuelan bonds were down 1 to 2 points across the yield curve, mostly on Friday's news that Standard & Poor's lowered its long-term foreign and local currency sovereign credit ratings on Venezuela to B+ from BB-.

Meanwhile Tarjeta Naranja SA plans to tap its 9% notes due 2017 in a deal being led by Bank of America Merrill Lynch.

Venezuela bonds weaken

Venezuela's dollar-denominated 9¼% bonds due in 2027 were 68¼ bid, 69 offered, down 2 points in the middle of the New York afternoon, according to a trader.

In general, Venezuela was 1 to 2 points weaker across the curve, the trader added.

On Friday S&P lowered its long-term foreign and local currency sovereign credit ratings on Venezuela to B+ from BB-.

The downgrade follows the implementation of S&P's revised methodology and assumptions for sovereign ratings, which assigns a heavier weight to political risk, which S&P deems a credit weakness for Venezuela.

"In our opinion, changing and arbitrary laws, price and exchange controls, and other distorting and unpredictable economic measures have undermined private-sector investment and hurt productivity - weakening Venezuela's domestic economy," S&P stated in its rating action.

"Furthermore, the recent developments regarding president Hugo Chavez's health could add to policy uncertainty.

"The country's vast oil and gas reserves, which are key positives in external and fiscal performance, somewhat offset the policy uncertainty."

Elsewhere on Monday, the news services reported that Venezuela announced its intentions of repatriating its 99 tons of gold holdings from the Bank of England.

Apart from Venezuela, among big liquid issues in the corporate space, Hutchison Whampoa International Ltd.'s 6¼% notes due 2014 were unchanged at 109½ bid, according to a market source in Europe.

Petrobras International Finance Co. Ltd.'s 8 3/8% notes due 2018 were 124 bid, up half a point.

The bonds of Lukoil International Finance BV were unchanged across the maturity curve. Lukoil's 6 1/8% notes due 2020 were 102¼ bid.

Tarjeta Naranja offering eyed

The primary market produced very little news on Monday, sources said.

Argentina's Tarjeta Naranja plans to bring a $100 million tap of its 9% senior notes due Feb. 1, 2017 (//B), according to market sources.

Bank of America Merrill Lynch is the lead manager, according to an informed source, who declined to specify the timing of the deal or furnish any additional information.

The original $200 million issue priced at par on Jan. 25, 2011 via Bank of America and Deutsche Bank Securities Inc.

Tarjeta Naranja is a credit card issuer based in Cordoba, Argentina.

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