NEW YORK, Sept 16 (IFR) - Investors were actively adding risk and searching for bargains among Brazilian corporate bonds, helping the overall tone in the Latin American credit markets on Wednesday.
Traders were attributing the better tone to short covering and the very cheap prices on offer in a market that has sunk substantially following S&P’s decision last week to downgrade both the Brazilian sovereign and oil company Petrobras to junk.
“There are some buyers of risk for the first time in quite some time in Brazil,” said a New York based trader.
Miner Vale, banks and construction company Odebrecht were enjoying a bid as bargain hunters emerged. The latter’s long end has rallied a good five points over the last week, with its 2042s being bid today at around 66.50.
Despite the arrest of its CEO on corruption charges earlier this year, Odebrecht remains a favorite among dedicated accounts who like the construction company’s strong balance sheet and its diverse geographic portfolio.
Traders expressed hope that any fallout from the Petrobras kickback scandal will fall firmly with individuals involved rather than the companies they run.
Petrobras bonds were under pressure amid talk that high-grade passive index players were cutting exposure to a credit that now carries two junk ratings.
Meanwhile, in the oil space, Pacific Exploration - the E&P company formerly known as Pacific Rubiales - received another blow on Wednesday when Moody’s downgraded it by three notches to B3 with a negative outlook.
So far market reaction has been muted with little price movement, the only exception being its 2019s which have slipped close to a point today to 55.75.
Moody’s cited expectations of low oil prices, the loss of the company’s Rubiales field in Colombia and slower than expected momentum on asset sales. “Everyone knows about Pacific’s problems so a downgrade by Moody’s isn’t news any more,” said a second trader.
The Province of Neuquen, the third largest oil-producing and the largest gas-producing province in Argentina, has mandated Deutsche Bank and J.P. Morgan to arrange a series of fixed income investor meetings commencing on Wednesday, September 16.
A USD-denominated 144A/RegS senior secured capital market transaction (secured by gas royalties) may follow, subject to market conditions.
Panama’s Canal Authority (ACP) has kicked off investor meetings through Bank of America Merrill Lynch as it looks to market a US dollar 144A/Reg S bond.
ACP, the entity in charge of the operation and expansion of the Panama Canal, is in Chicago September 16, New York on September 17 and Boston on September 18. Roadshows end on September 21 in London. The issuer is rated A2/A-/A.
Mexican real-estate investment trust Fibra Uno has wrapped up meetings with fixed-income investors through Bank of America, Credit Suisse, HSBC and Santander.
Terrafina, another Mexican REIT, has also finished meeting accounts as it markets a potential US$400m-$500m bond offering. The borrower has mandated Barclays and Citigroup as lead managers, with Itau coming in as co-manager. Expected ratings are Baa3/BBB-. Both REITs could tap the market this week. (Reporting By Paul Kilby)