Pacific Rubiales bonds remain strong; Middle East sees buyers; roadshow for China Minsheng

By Christine Van Dusen

Atlanta, May 8 – Toronto-based and Colombia-focused Pacific Rubiales Energy Corp. was on radar screens again while Latin American notes widened by the afternoon and the tone for Asian bonds improved.

The move in Treasury rates to 2.15% also led to increased buying of some Middle Eastern bonds, specifically the 2043s and 2044s from Saudi Electricity Co., the 2043s from Dubai, the 2037s from DPWorld and the 2044s from Bahrain, a trader said.

“We’ve seen 98 prints on Bahrain’s 2044s,” he said. “That’s 25 basis points tighter on the month.”

Meanwhile, Pacific Rubiales received attention after a group of Venezuelan investors raised its stake at the same time that Alfa SAB and Harbour Energy Ltd. were looking to make a buyout offer.

The group of investors, through O’Hara Administration, this week became Pacific Rubiales’ third-largest shareholder.

“After speaking with a member of the O’Hara group, we are confident that its growing involvement in the Pacific Rubiales story does not pose a significant risk to Alfa and Harbour,” a London-based trader said. “Strength has carried over from yesterday, though not much going through so far.”

The company’s 5 3/8% notes due 2019 traded Friday morning at 91 bid, 91¾ offered after Thursday’s 91 bid, 92 offered. The 7¼% notes due 2021 were seen Friday at 93½ bid, 94½ offered, flat to Thursday.

The 5 1/8% 2023s moved to 85½ bid, 86¼ offered on Friday after trading on Thursday at 85.88 bid, 86.62 offered. And the 5 5/8% notes due 2025 were spotted Friday at 85¾ bid, 86½ offered after strengthening to 86 bid, 86¾ offered.

In other trading from Latin America, low-beta names were better-offered during the morning session, a New York-based trader said.

Bids were taking a hit and credit default swaps were widening slightly, he said, amid better selling.

Lat-Am widens

As the session went on, bond spreads for Latin American names widened by at least 10 bps across most major curves, spurred by a wave of selling that began late-Wednesday, a London-based trader said.

“We saw decent buying flows into the close, and the market recovered a few bps to close at the day's best levels, but still with a lot of damage done,” he said. “Credit default swaps fared much better, only 1 bp to 3 bps wider.”

Bonds from Brazil saw their curve steepen, “which is surprising, given the rally in the U.S. long bond,” he said.

Pemex trades ‘poorly’

From Mexico’s corporate space, Petroleos Mexicanos SAB de CV (Pemex) continued to trade “very poorly,” he said. “Sometimes there were no bids to be found, and any attempt at trying to hold the market was met with more selling. The long end has been particularly badly hit, and now looks extraordinarily cheap.”

The cheapest, he said, was the company’s 2041 bonds.

Asia improves

The tone for Asian bonds improved on Friday after the small sell-off on Thursday, another London-based trader said.

The new issue of notes from China Merchants Bank Co. Ltd. – 2 3/8% senior notes that priced Thursday at 99.684 to yield Treasuries plus 147.5 bps – traded up to 180 bps before moving to 168 bps and closing at 171 bps bid, 168 bps offered.

CCB notes firm

China Construction Bank (Asia) Corp. Ltd. saw its new 3.996% notes due in 2025 firm up, trading at 239 bps before closing Friday’s Asian session at 240 bps bid, 237 bps offered. The notes priced this week at 99.456 to yield Treasuries plus 242.5 bps.

“Many accounts still find this rather cheap,” the trader said.

And China-based Alibaba Group Holding Ltd.’s curve started Friday’s session unchanged after the e-commerce company announced better-than-expected first-quarter results.

“But buyers emerged, post-London open, with the 2021s up at 162 and the 2024s at 156,” he said.

Funds see inflows

Despite challenging market conditions, emerging markets bond funds saw inflows for the week ending May 6, according to a report from Schildershoven Finance BV.

Hard-currency funds saw $100 million in inflows while local-currency funds took in $350 million.

“Blended-currency funds showed $130 million inflow,” the report said.

Cimento Tupi in focus

Brazil’s Cimento Tupi SA, which saw Fitch Ratings drop its credit rating to CCC, is looking at a possible restructuring of its debt, Schildershoven said in its report.

“The company faced difficulties after an investigation into Brazil’s largest construction companies started in the end of 2014,” the report said. “The company will face an interest payment on May 11. There are a lot of concerns in the market that Tupi will fail to service its debt.”

The bank recommends that investors avoid the company’s debt, for the time being.

Minsheng Banking sets roadshow

China Minsheng Banking Corp. has mandated bookrunners for a dollar-denominated issue of notes, a market source said.

UBS, Citigroup, HSBC and CMBC Hong Kong are the joint global coordinators and – along with Barclays, China Construction Bank, Agricultural Bank of China, Bocom Hong Kong Branch, Deutsche Bank and Jefferies – the bookrunners for the deal.

The notes will be marketed during a roadshow that is set to start on May 11.

The issuer is a Beijing-based bank.

© 2015 Prospect News.
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