LatAm primary sees more deals; Brazil ‘strong outperformer’; Indonesia prints $4 billion

By Rebecca Melvin

New York, Dec. 5 – Latin America’s primary market was active again on Tuesday with Alpha Holding SA de CV starting a roadshow for a planned offering of dollar denominated notes with stops in Asia, Europe and the United States and Tecpetrol SA pricing $500 million of five-year notes after wrapping up a roadshow on Monday.

The Alpha notes have expected ratings of B1 from Moody’s Investors Services and B+ from S&P.

The Tecpetrol notes priced at par at the tight end of revised guidance for a coupon of 4 7/8%.

In the secondary market, Brazil’s sovereign credit pared gains on Tuesday after an aggressive bid higher earlier in the day but still ended the session higher.

“Brazil was very strong; now people are lightening up a little bit, but it was a strong outperformer,” a New York-based trader said.

The Brazilian curve ended the day up more than a point for longer-dated maturities and up about a point in the medium-term notes. That compared to moves up more than 2 points and 1½ points, respectively.

It was unclear what was pulling the Brazil sovereign market higher, but the liquid notes due 2025, 2028, 2041, 2045 and 2047 were all trading notably, the trader said.

Venezuela strengthened slightly into the close after opening marginally weaker, but overall the sovereign paper and that of its state-owned oil company Petroleos de Venezuela SA has been drifting in quiet trade as uncertainty in the financial markets prevails and turmoil in the political sphere continues.

On Tuesday, Venezuela’s U.N. envoy announced his resignation, saying he was stepping down at the request of President Nicolas Maduro.

Rafael Ramirez’s resignation is the latest in a string of bombshells related to Venezuela’s sweeping crackdown on alleged corruption. The government has arrested dozens of oil-industry executives in recent weeks. Last week, Major General Manuel Quevedo was appointed as minister of petroleum and chairman of PDVSA, a change that occurred just three months after Maduro appointed Nelson Martinez as PDVSA’s chairman and Eulogio Del Pino as oil minister.

According to Maduro, when he made the Quevedo announcement, the general is tasked with “promoting the restructuring of the state-owned oil company after the disclosure in the last few weeks of at least seven corruption cases that threaten the nation’s heritage.”

Most of the issues of Venezuela’s sovereign curve were trading in the low 20 range. They were trading with interest but at levels that were just about where the “dirty price would be,” a market source said.

The big question is whether Maduro will make the coupon payments, the source said.

Meanwhile, S&P said Tuesday it lowered the issue-level ratings on PDVSA senior unsecured notes due 2017 to D from CC due to the company’s failure to make a payment on the notes within the 30-calendar-day grace period, which expired on Dec. 2. However, the agency said it understands that the company has paid the principal amount.

Elsewhere in emerging markets, Indonesia’s new $4 billion of senior unsecured notes hit the market on Tuesday after pricing late Monday. The five-, 10- and 30-year tranches priced at the tight end of final price guidance and with a negative new issue premium across all three tranches, according to a government release.

“The issuance resets the Indonesian yield curve whilst diversifying the investor base with the new SEC-registered format. Additionally, the 3.00% yield on the five-year and the 4.40% yield on the 30-year coupons are the lowest ever achieved in those tenors by the Republic of Indonesia while the US$4 billion issue size matches its January 2014 and January 2015 issues as the largest issuances done,” the release stated.

The final order book for the Indonesia notes showed diversified demand across regions and investor types with 120, 129 and 153 accounts participating in the five-, 10- and 30-year, respectively.

Forty percent of the five-year tranche was allocated to the United States, 25% to Europe, 21% to Asia (ex-Indonesia) and 14% to Indonesia. By investor type, 54% was allocated to asset managers, 26% to banks, 10% to pension funds and insurers, 8% to sovereign wealth funds/central banks and the remaining 2% to private banks.

The 10-year tranche was allocated 48% to the United States, 22% to Europe, 20% to Asia (ex-Indonesia) and 10% to Indonesia. By investor type, 47% was allocated to asset managers, 32% to banks, 19% to pension funds and insurers, and 2% to sovereign wealth funds/central banks.

And the 30-year tranche was allocated 65% to the United States, 12% to Europe, 22% to Asia (ex-Indonesia) and 1% to Indonesia. By investor type, 59% was allocated to asset managers, 27% to pension funds and insurers, 10% to banks, and 4% to sovereign wealth funds/central banks.

In general emerging market credit was mostly steady. Investors eyed the confirmation process of nominee Jerome Powell as the next chair of the U.S. Federal Reserve. Powell’s nomination cleared the U.S. Senate Banking Committee handily with a 22-1 vote in favor of the nomination. If confirmed, Powell will succeed Janet Yellen when her four-year term expires on Feb. 3.

Meanwhile, a two-day Gulf Cooperation Council Summit got underway in Kuwait as a boycott of Qatar by some of its members continues. The United Arab Emirates announced at the start of the meeting that it has formed a new economic and military alliance with Saudi Arabia separate from the GCC. The only heads of state attending the summit are Kuwait’s ruling emir Sheikh Sabah Al Ahmad Al Sabah and Qatar’s ruling emir Sheikh Tamim bin Hamad Al Thani. Bahrain, Saudi Arabia and the United Arab Emirates all sent lower-ranking officials to the meeting.

© 2015 Prospect News.
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