Colombia notes trade up; Venezuela active, flat as political crisis unfolds; Turkey prices

By Rebecca Melvin

New York, Jan. 24 – Latin America captured a lot of attention of emerging markets debt players on Thursday as Colombia priced a dual tranche of notes that attracted record demand, Termocandelaria Power Ltd. priced a deal that had been on the primary calendar and as a political crisis unfolded in Venezuela, rekindling speculation about its international bonds, which have been virtually cordoned off from the market amid that country’s slow economic meltdown.

Colombia’s newly priced $2 billion of new 30-year notes and tap of its 4½% global bonds due 2029 traded higher, with the bonds heard about 0.75 point higher and about 5 basis points tighter on spread, according to a New York-based trading source.

Colombia priced $1.5 billion of the new 5.2% notes due 2049 at 99.705 to yield 5.22%, or a yield spread of Treasuries plus 215 bps.

The $500 million tap of the 2029 notes priced at 100.429 to yield 4.446%, or Treasuries plus 170 bps.

A shift in sentiment for emerging market debt means that these bonds saw strong demand during the pricing phase. According to one source, the Colombia dual-tranches attracted orders for almost $12 billion.

A second deal from Colombia’s that was on the calendar also priced. Termocandelaria, a power generation company based in Soledad, Colombia, priced $410 million of 7 7/8% notes due 2029 at par, which was tight to initial talk for a yield in the low 8% range.

Proceeds are expected to be used for downstream operating subsidiaries and to repay existing debt.

BofA Merrill Lynch and Scotia were joint bookrunners for the Rule 144A and Regulation S notes deal, which have a make-whole call at Treasuries plus 50 bps.

In the secondary market, Venezuela’s bonds were more or less flat on Thursday after a surge on Wednesday after the country’s opposition leader Juan Guaido assumed presidential authority as Venezuelans rallied in street protests against the leadership of current socialist president Nicolas Maduro.

The Venezuela sovereign curve started weaker and then rebounded in early trading, a New York-based trading source said.

The volume of bonds changing hands is higher, the source said, with “decent flow, but they’re not ramping up like some people thought they would.”

Uncertainty may be holding the bonds back. Venezuela’s benchmark 2027 bonds rose to 31.5 on Wednesday, which was up 2 or more points on the day and near its highest level in seven months.

“It’s not a done deal yet,” the market source said regarding the ouster of Maduro, who has been at the helm of a regime that over the course of the last several years leaves Venezuela’s social and economic fabric in tatters.

The U.S. government now recognizes Guaido as president and said that it is disregarding Maduro’s order that all U.S. diplomats leave the country. Also on Thursday, Maduro ordered all Venezuelan diplomats home from the United States, closing its embassy. He said that if the U.S. officials have any sense they would pull their diplomats out of Caracas.

The United States has requested an open meeting of the U.N. Security Council on Saturday “to discuss the ongoing crisis in Venezuela.”

Meanwhile, Venezuela’s Corporacion Andina de Fomento (CAF) priced €750 million of 0.625% five-year notes, according to a market source.

The Caracas, Venezuela-based development bank priced the Regulation S deal via joint bookrunners Barclays Bank plc, BNP Paribas and J.P. Morgan.

Also in the primary market on Thursday, Turkey announced and priced €1.25 billion of new 4 5/8% notes due 2025 at 99.360 to yield 4¾%, or a spread of 446 bps over mid-swaps.

Pricing of the notes was on the tight end of guidance for a yield of 4.8%, plus or minus 5 bps, and below initial price talk for a 5% area yield.

The Securities and Exchange Commission-registered global offering was sold via joint bookrunners BNP Paribas, Deutsche Bank and JPMorgan, which is doing billing and delivery.

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