Petrobras, Brazil get attention; Motherson suffers from Volkswagen scandal; PCA preps deal

By Christine Van Dusen

Atlanta, Sept. 23 – Some risky assets firmed up on Wednesday, despite the equity sell-off in Asia, as investors kept a close eye on Brazilian corporate paper and India-based Samvardhana Motherson Automotive Systems Group BV.

Asian credits ended their session on Wednesday mixed, with investment-grade bonds unchanged to 3 basis points wider, a London-based trader said.

“Most of Korea was firm,” he said. “India closed unchanged after opening wider, with European buyers in 10-year corporates. Malaysia was unchanged to 5 bps wider.”

Sukuk from Malaysia, he said, remained well bid.

Meanwhile, India-based Samvardhana Motherson Automotive Systems had investors wondering whether the components supplier would suffer under the weight of the Volkswagen investigation.

German regulators say that Volkswagen lied about emissions levels for some of its vehicles. That news sent the company’s stock crashing. Motherson is a leading supplier.

Motherson’s management attempted to calm investor fears during a conference call, saying that this was just a recall, but “the investors aren’t believing them right now, with credit spreads widening considerably,” Schildershoven said in its report.

The option adjusted spread for Motherson’s 2021s has moved out to 506 bps.

Brazil remained on radar screens on Wednesday after managing to trade fairly well on Tuesday “despite the debacle in the [currency] and the meltdown in Brazilian corporates,” a New York-based trader said.

Brazil-based Petroleo Brasileiro SA saw high volume and liquidity on Tuesday, another trader said, and hovered near the previous day’s close. And Vale SA was very quiet after tightening as much as 30 bps last week.

Hungary prices get support

Prices for government bonds from Hungary are expected to remain relatively high, despite weak economic data, as a result of the Central Bank’s decision to leave its main interest rate unchanged, according to a report from Schildershoven Finance BV.

The bank “switched to a new three-month policy tool, which should boost liquidity and increase local banks’ demand for government paper,” the report said. “Loose monetary conditions could prevail for even longer than previously expected.”

Ukraine bonds under pressure

From Ukraine, bonds so far this week have faced pressure as investors eyed the sovereign’s debt restructuring, said Fyodor Bagnenko, a fixed-income trader from Dragon Capital.

As of Wednesday, Ukraine was set to suspend payments in order to begin restructuring and writing off sovereign debt.

And investors were keeping an eye out for the upcoming issue of dollar-denominated notes from Turkcell Iletisim Hizmetleri AS, which was expected to conclude a roadshow on Wednesday for an offering of notes.

BNP Paribas Securities Corp., Citigroup Global Markets Inc. and HSBC Securities are the bookrunners for the Rule 144A and Regulation S deal.

PCA sets initial talk

Autoridad del Canal de Panama, also known as the Panama Canal Authority (PCA), set talk in the Treasuries plus 230-bps area for its upcoming issue of $450 million 20-year amortizing senior unsecured bonds, a market source said.

BofA Merrill Lynch is the sole bookrunner for the Rule 144A and Regulation S deal.

The proceeds will be used to partially refund financing of the construction of the Atlantic Bridge.

The PCA is an autonomous, legal entity of Panama, charged with operation, administration, management, preservation, maintenance and modernization of the Panama Canal.

Fiji sells new notes

On Tuesday, Fiji priced $200 million 6 5/8% notes due Oct. 2, 2020 at 98.957 to yield 6 7/8%, a market source said.

ANZ was the sole bookrunner for the Regulation S deal.

The proceeds will be used for refinancing indebtedness and for general development funding.

Some market-watchers were not big fans of the new deal. “Credit spreads are too tight,” according to a report from Schildershoven Finance BV.

The new issue followed Fiji’s early closure of a tender offer for its $250 million of 9% notes due 2016.

Holders had tendered $243.15 million, or 97.26%, of the notes as of 5 a.m. ET on Sept. 22, according to a company news release.

All of the tendered notes have been accepted for purchase. The settlement date is expected to be Oct. 2.

The republic offered par for the notes.

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