New deals from CAF, Tocumen, Dominicana; Vale’s bonds fall, Brazil’s outperform; Qatar dips

By Christine Van Dusen

Atlanta, May 4 – Venezuela’s Corporacion Andina de Fomento (CAF), Panama’s Aeropuerto Internacional de Tocumen SA (Tocumen International Airport) and Dominican Republic-focused AES Andres Dominicana SPV were among the issuers to print notes on a challenging Wednesday for emerging markets assets.

“Global risk assets finish the day on weak footing after numerous attempts to pare losses,” a New York-based trader said. “We do close well off of our lows and wides of the session.”

Brazil managed to outperform, with its five-year credit default swaps spreads closing at 343 basis points from 345 bps, but Mexico’s moved to 171 bps from 167 bps.

“Cash prices outperform CDS levels, with some bonds actually higher on the day, as the divide between CDS spreads and bond prices continues to widen,” he said. “Lat-Am high yield finishes mixed on the session.”

Venezuela’s 2027s were down at 40.50 from 41.25, PDVSA’s 2017s moved to 56.20 from 57.25, and Argentina’s new 2026s ticked up to 101.25 from 101.10.

“Flows on the lighter side today, with not a whole lot of conviction seen,” he said.

Corporate issuers from Latin America were whipped around during the session, with Brazil-based Vale SA opening three points lower falling on Tuesday on the news that Brazilian prosecutors had filed a civil suit against the company, another trader said.

The suit is related to the November dam break that resulted in fatalities and environmental destruction.

Also impacting the picture on Wednesday was the further decline in oil prices, he said.

“Still seeing odd-lot selling from various account bases, and dealers are seemingly comfortable to bid them back up now,” he said.

Mexican banks see demand

Banks from Mexico were in demand on Wednesday, the trader said.

“Very few institutional sellers have been seen as we have grinded higher intermittently the last five-plus weeks,” he said.

‘Tricky’ day for Middle East

Looking to the Middle East, it was an “active and tricky day,” a London-based trader said.

“All told, this particular market holds in pretty well despite some weakness witnessed elsewhere,” he said. “Of course, once again the technicals rule the roost, and there is a slew of bonds where it feels the free float diminishes by the day.”

Long-dated Qatar bonds dipped two points on whispers about a possible deal, he said.

“The belly was wider by 4 bps to 8 bps,” he said.

Abu Dhabi’s 2021s and 2026s took a hit on the news, with the 2021s trading at 99.90 before moving to 99.65 late in the day.

South Africa may see downgrade

Investors were also keeping an eye on South Africa after the South African Reserve Bank’s review showed a “high probability that the sovereign will be downgraded to junk,” a strategist said. “A downgrade by S&P in June or December remains a substantial threat.”

This could lead to capital outflows, wider credit default swap spreads and reduced access to funding, he said.

CAF sells notes

In its new deal, Venezuela’s CAF priced $1.25 billion 2% notes due May 10, 2019 at 99.991 to yield 2.003%, or mid-swaps plus 100 bps, according to a company filing.

The notes were talked at a spread in the 105 bps area.

BofA Merrill Lynch, Citigroup and HSBC were the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general corporate purposes, including funding lending operations.

CAF is a lender based in Caracas, Venezuela.

Tocumen prints bonds

Panama’s Tocumen International Airport priced a $625 million issue of notes due in May of 2036 at a yield of 5 3/8%, a market source said.

The notes were talked at a yield in the 5½% area.

Citigroup was the bookrunner for the Rule 144A and Regulation S deal.

The proceeds will be used for capital expenditures.

Other details were not immediately available on Wednesday.

The airport is located in Panama City.

Dominicana does deal

Dominican Republic-focused Dominicana sold $370 million 7.95% notes due 2026 at 97.984 to yield 8¼%, a market source said.

The notes were initially talked at a yield in low-to-mid-8% area. Then talk was revised to the 8 3/8% area.

Citigroup and Credit Suisse were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used to repay outstanding bridge loans, and for general corporate purposes.

Andres Dominicana is a special purpose vehicle for Virginia-based AES, a private power generator in the Dominican Republic.

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