EM tightens post Fed; Shougang, Bank of Bogota price; calendar grows; Venezuela unrest flares

By Rebecca Melvin

New York, July 27 – Emerging market credits were a little tighter on Thursday, with improved tone in most regions given the U.S. Federal Reserve’s policy setting meeting was in the rearview mirror, a market source said.

The Fed left its key interest rate unchanged and balance sheet reductions were indicated to begin “relatively soon,” according to a Fed statement on Wednesday following a two-day policy meeting.

U.S. Treasuries rallied somewhat after the decision, but turned around on Thursday to sit at about where they had been shortly before the announcement. The yield on 10-year Treasury note was little changed on the day at about 2.316% Thursday afternoon.

Meanwhile, Venezuela’s bonds slipped about 0.25 point to 0.5 point below Monday’s lows as unrest in Venezuela continued. Opposition-led demonstrations and a two-day national strike left the unpopular government of President Nicolas Maduro still on course for a July 30 vote to install a constituent assembly with the power to rewrite the country’s constitution and dissolve the opposition-majority National Assembly. Reuters reported that three people had died in clashes with security forces in the last two days.

In the primary market, there was a mix of dollar-, euro- and local-currency denominated deals that priced and several issuers that joined the calendar.

In Asia, China steelmaker Shougang Co. Ltd. priced €400 million of 1.35% three-year senior unsecured notes (expected ratings: //A-) at mid swaps plus 142.5 basis points.

At the reoffer price of 99.875, the book for Shougang’s Regulation S deal was about €1.4 billion, according to a syndicate source.

Banco de Bogota SA priced $600 million of 10-year senior notes (expected ratings: Baa2/BBB-/BBB) at 98.512 to yield 4.562%.

Proceeds of the Rule 144A and Regulation S notes – sold by bookrunners Citigroup, BofA Merrill Lynch and HSBC – were expected to be used to repay a bridge loan due Jan. 11, 2018 with remaining proceeds for general corporate purposes.

Also in the market is a planned $500 million, five-year benchmark for the Republic of Iraq, which starts roadshowing on Friday.

The Iraq deal will be sold by joint bookrunners Citigroup, Deutsche Bank and JPMorgan, with the Trade Bank of Iraq acting a co-manager.

London-listed metals and energy company Vedanta Resources plc also plans to start a roadshow on Monday in London and Singapore for a dollar-denominated offering of seven-year, non-call four notes.

The company has mandated Barclays Bank plc, Credit Suisse (Hong Kong) Ltd., DBS Bank Ltd., J.P. Morgan Securities plc, National Bank of Abu Dhabi and Standard Chartered Bank as joint bookrunners for the Rule 144A and Regulation S notes, which will also roadshow in New York and Boston.

Vedanta is planning to use proceeds to fund a tender offer for its existing 6% bonds due 2019 and 8¼% bonds due 2021, which runs until 8 a.m. ET on Aug. 3. There are $774,772,000 and $900 million, respectively, outstanding on these bonds.

London-listed Vedanta is a metals and energy company with operations in Asia and Africa.

And Mexico City-based broadcaster TV Azteca SAB de CV has scheduled investor meetings for its planned $350 million of seven-year senior unsecured notes through to the middle of next week.

The deal is being sold via bookrunners BCP Securities and Jefferies, with proceeds to be used mainly for refinancing of existing notes and for general corporate purposes.

In Latin America, Venezuela remained a focus of concern. Opposition-led protests were slated to continue despite a new government ban on public demonstrations.

“I’m afraid that unrest is going to step up as the government doubles down,” a trader of Latin America debt said.

“I have heard that meeting between the government and the opposition are not going well,” the trader said Thursday afternoon.

“It looks like the worse-case scenario will result, the trader said, and sellers of Venezuela debt were lined up at the exits.

Bond prices were about 0.25 point to 0.5 point below Monday’s lows despite a rally in that paper on Tuesday.

Three have been killed in clashes between Venezuelan security forces and demonstrators during the national strike, which is being held to protest the Maduro regions’ election on Sunday, according to a Reuters report.

There appeared to be less support for the strike compared to the one-day shutdown last week, but several interviewed said they support the opposition and were working only out of necessity to feed their families.

But according to the Venzeuelan prosecutor’s office, a 23-year-old man was killed in western Merida state and a 16-year-old died in the Petare neighborhood of Caracas on Thursday. While on Wednesday, a 30-year-old man was killed on the first day of strikes in Merida state. At least 106 people have died since April when protests began following decisions by Venezuela’s Supreme Court that were seen as undemocratic.

Petroleos de Venezuela SA’s 8½% notes due 2017 slid back down to 77 bid, 79 offered on Thursday from 80¼ bid, 81½ offered on Tuesday, according to a trader.

PDVSA’s 8½% notes due 2020 were quoted down at 66 bid, 68 offered compared to 69½ bid, 70½ offered on Tuesday, and the PDVSA 6% notes due 2024 were at 34 bid, 36 offered from 36½ bid, 37½ offered on Tuesday.

Among Venezuela’s sovereign issues, the Venezuela 6% notes due 2020 closed at 39½ bid, 40½ offered compared to 40½ bid, 41½ offered of Tuesday. The Venezuela 11¾% notes due 2026 were at 42 bid, 44 offered, down from 45½ bid, 46½% offered Tuesday, and the Venezuela 11.95% notes due 2031 were off their lows at 41½ bid, 42½ offered from 44½ bid, 45½ offered on Tuesday.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.