Pemex prices dual-tranche deal; Safra sells notes; Nostrum, First Abu Dhabi join calendar

By Rebecca Melvin

New York, Feb. 1 – Market players were taking a look early Thursday at the announced deal of Petroleos Mexicanos SAB de CV. Later the Mexican petroleum company priced $4 billion of global notes in two tranches well below initial price talk.

“We took a look at that this morning, and got an understanding of the trade,” a New York-based market source said, noting that the new bonds are part of a multi-part refinancing that includes exchanges and tenders of some or all of Pemex notes due 2019, 2020, 2044 and 2046.

A second source said the new issue premium for the new Pemex notes would likely to be pretty tight if last week’s Petroleo Brasileiro SA deal was any indication. The Petrobras notes came 2 basis points inside fair value, the source said.

The Pemex notes ended up including $2.5 billion of 5.35% notes due 2028 that priced at par and a $1.5 billion tranche of 6.35% notes due 2048 that also priced at par. They came tight compared to initial talk for a yield of 5¾% and 6¾%, respectively.

Also in the Latin America region on Thursday, Brazil’s Banco Safra SA priced $500 million of dollar five-year notes to yield 4 3/8%, which was below initial talk for a yield around the mid-4% area.

Safra is a Sao Paulo-based local bank that is part of a larger group including banking and financial institutions, industrial operations, real estate and agribusiness.

JBS was also in the market on Thursday, with JBS USA Lux SA and JBS USA Finance Inc. pricing $900 million 10-year notes at par to yield 6¾%. Proceeds were being used to fund the redemption of the company’s 8¼% notes due 2020.

The successful pricing of various deals represented a continuation of the emerging markets’ strong primary action. There was record new issuance in emerging markets for January, and things got off on the right foot for February, a New York-based market source said.

The source expected that emerging markets would continue to have the wind at its back as long as economic growth remained strong. What happens with rates and unwinding of the Federal Reserve’s asset purchasing program were also being watched for their potential influence on emerging markets, the source said.

U.S. Treasury rates, which have been trending up in recent weeks, spiked higher on Thursday, leaving the yield on the 10-year benchmark Treasury up near 2.79% at the end of the day.

Elsewhere, Nostrum Oil & Gas plc will begin to roadshow a dollar-denominated offering of seven-year notes on Friday, which will be sold under Regulation S and Rule 144A, and First Abu Dhabi Bank PJSC selected bookrunners for a planned offering of dollar-denominated five-year Islamic bonds.

Pemex prices $4 billion

Pemex priced new notes and embarked on liability management transactions on Thursday, ultimately pricing $4 billion of new paper at pricing that was well below initial talk.

A $2.5 billion tranche of 5.35% notes due Feb. 12, 2028 priced at par, compared to initial price talk of 5¾%.

And a $1.5 billion of 6.35% notes due Feb. 12, 2048 also priced at par, compared to initial talk at 6¾%.

The Rule 144A and Regulation S notes were sold via bookrunners BNP Paribas, Citigroup, BofA Merrill Lynch and SMBC.

Safra brings $500 million

Banco Safra priced $500 million of 2023 notes with a 4 3/8% coupon, which was inked well below initial talk at the mid-4% area.

The notes were expected to be rated Ba2 by Moody’s and BB- by S&P.

The Rule 144A and Regulation S unsecured notes were marketed by bookrunners Citigroup, JPMorgan and Morgan Stanley.

First Abu Dhabi roadshow

The United Arab Emirates based lender selected banks to arrange a series of fixed-income investor meetings in connection with a possible five-year dollar-denominated Islamic bond.

The banks managing fixed-income investor meetings scheduled for Monday in London are Citigroup, First Abu Dhabi Bank, KFH Capital, NCB Capital and Standard Chartered.

The notes will be sold under Regulation S.

Nostrum Oil & Gas eyes notes

Banca IMI, Citigroup, Deutsche Bank and VTB Capital will arrange fixed-income investor meetings for a dollar seven-year note for Uralsk, Kazakhstan-based oil and gas exploration and production company Nostrum.

The roadshow for the Rule 144A and Regulation S notes was expected to begin on Friday.

Proceeds may be used to refinance Nostrum’s 2019 eurobonds, issued by subsidiary Zhaikmunai LLP.

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