Belarus bonds rally; Venezuela, PDVSA bonds drop with lower oil; Pampa Energia plans issue

By Rebecca Melvin

New York, June 22 – The Republic of Belarus’ new $1.4 billion of notes in 5½- and 10-year tranches tightened on Friday by 20 to 30 basis points, as emerging markets overall saw a strong bid, market sources said.

The move in the Belarus 6 7/8% notes due 2023 and Belarus 7 5/8% notes due 2027 represented a significant rally, which should be chalked up to good pricing, one source said.

The shorter-dated notes priced at 98.864 for a 7¼% yield and the longer-dated, 7 5/8% tranche priced at par.

They jumped higher and did well, but the entire market was firmer, a London-based trader said of the Belarus bonds. “There were good bids for most things.”

Also new to the secondary market on Friday was Turkiye Is Bankasi AS (Isbank)’s $500 million 11-year bonds that priced at par to yield 7%.

Argentina’s Pampa Energia SA is also planning a new issue with investor meetings set next week regarding up to $500 million equivalent in Argentine peso-denominated notes due 2022. The Rule 144A and Regulation S notes would be denominated in pesos but paid out in dollars; and they have a provisional Moody’s rating of B3 and a provisional S&P rating of B.

Back in established issues, Venezuela’s bonds were down on the week in tandem with lower oil prices. The debt of both the Venezuela sovereign and its state-owned oil company, Petroleos de Venezuela SA, were down 6 to 8 points since May 31, a trader said.

Venezuela, PDVSA debt drop

PDVSA 8½% notes due 2017 were indicated at 85¾ bid, 86¾ offered on Friday, down from 91 bid, 91½ offered on May 30, according to the market source.

PDVSA 12¾% bonds due 2022, which were the bonds that Goldman Sachs purchased for 31 cents on the dollar in May, were indicated at 54 bid, 55 offered, which was down from 61½ bid, 62½ offered on May 30.

The 6% notes due 2026 were down by 4 points or so to 35 bid, 36 offered. And the 5½% notes due 2037 were at 34¼ bid, 35½ offered, which was in about 3 to 4 points.

Venezuela’s 6% notes due 2020 were down to 44½ bid, 45½ offered from 50¾ bid, 51¾ offered at the end of May, and the sovereign’s 11¾% notes due 2026 were at 50½ bid, 51½ offered from 56¼ bid, 57¼ offered.

The bonds had gotten a boost at the end of May on reports that Goldman Sachs had bought $2.8 billion of certain PDVSA bonds. But despite the Goldman lift, the bonds have retraced those gains and shed a few more to boot, a trader said.

He said the drop was related to oil prices and that Venezuela’s bonds – which are more tightly tied to oil prices than any other Latin America debt – likely have further to fall.

“When oil was at $43 in April last year, the bonds were between 6 to 8 points lower than where they are now,” the trader said. “If oil doesn’t go up then these are going to go down.”

Oil traded down into bear market territory this week, and West Texas Intermediate crude oil for August delivery on Friday was up a little from the lows, at $43.01 a barrel.

“Venezuela is going to get hit more [than others],” the trader said.

Default threat

As for Venezuela’s political stability, market players are eyeing elections slated for July 31 and speculation that the elections will be postponed, notching a blow to the socialist regime of Nicolas Maduro.

Opposition-led protests might wind down a bit in the next few weeks, but they will pick up again at the end of July as the opposition attempts to postpone the elections and force Maduro out.

“It could get very messy,” the trader said, referring to violence associated street protests. “The elections are viewed as a catalyst to political change, but not necessarily regime change.”

As for the threat of default, the trader thought that Venezuela would be better served if a default occurred under the direction of the opposition party rather than driven by the Maduro government.

“I think that if the opposition is in charge there will be better opportunities to communicate with the international community and with the IMF,” the trader said, referring to the International Monetary Fund.

© 2015 Prospect News.
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