Macedonia prices; ‘business as usual’ despite higher oil prices; LatAm calendar slimmer

By Rebecca Melvin

New York, Jan. 12 – The emerging markets finished out a strong week on Friday as U.S. stock prices pressed up again and oil recovered from early weakness, but Treasury prices slipped.

“It was a pretty strong week, and it’s likely going to be a record month of issuance,” a New York-based market source said.

There are fewer deals on the calendar for the holiday shortened week in the United States next week, with markets closed on Monday in observance of Martin Luther King Jr. Day.

It was uncertain whether concerns regarding emerging markets that began to surface midweek would affect the pace of issuance or not.

“We expected to come back from a long weekend to continued strength in the market,” a New York-based syndicate source said.

There was talk of Qatar, Abu Dhabi and Saudi Arabia coming with deals on the heels of the $6.5 billion triple-tranche deal priced by Oman this week, a London-based market source said.

Despite higher oil prices that were expected to curb oil-producing countries’ appetite for debt capital markets, it “seems business as usual,” the source said.

In nearby Central & Emerging Europe, Macedonia priced €500 million of 2¾% seven-year notes to yield 3%, and in Latin America, four notable deals priced on Thursday.

Among them, Mexico’s Nemak SAB de CV priced $500 million of seven-year notes despite fears that reared up surrounding the renegotiation of the North America Free Trade Agreement on Wednesday.

Pricing came at the tight end of guidance for the Mexican auto parts manufacturer’s Rule 144A and Regulation S deal.

Meanwhile, Rede D’Or Sao Luiz SA made a cross-border debut with its pricing of $500 million of 4.95% 10-year notes at par. The Brazilian hospital owner and operator was able to notch a 10-year benchmark, when a seven- to 10-year note had been talked.

Marfrig Global Foods SA and BBVA Bancomer SA each pricing $1 billion deals were the other two issuers that priced on Thursday.

For next week, Mexico’s Unifin Financiera, SAB de CV Sofom ENR is on the calendar with a planned offering of up to $250 million of subordinated perpetual notes, and Hidrovias do Brasil SA is roadshowing dollar-denominated seven-year notes through Tuesday.

Those were the only two Latin America deals on the calendar so far, sources said.

Regarding Venezuela, which defaulted on its 2020 notes this past week and saw the sovereign curve begin trading flat, there was a modicum of improvement with support for the bonds now in the 20s, a New York-based trader said.

The Emerging Markets Trading Association ruled that the Venezuela sovereign curve should trade flat without accrued interest. But the same has not happened to the Petroleos de Venezuela SA bonds, which have held up slightly better than the sovereign notes and which were also up for the week.

On Friday, the PDVSA 12¾% notes due 2022 were up 0.45, or 1.75%, on the day at 26.10. That’s down from about 64 in January 2017.

S&P lowered its issue rating on the 2020 bonds to D from CC this week, noting that there are now eight Venezuelan issues with overdue coupons including the 7¾% bonds due Oct. 13, 2019; the 8¼% bonds due Oct. 13, 2024; the 7.65% bonds due April 25, 2025; the 11¾% bonds due Oct. 21, 2026; the 9% bonds due May 7, 2023; the 9¼% bonds due May 7, 2028; the 7% bonds due Dec. 1, 2018; and the 6% bonds due Dec. 9, 2020.

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