Pemex reopened its outstanding 5.5% 2021 bonds Wednesday for another $1bn, locking in sub 5% pricing and its lowest ever yield along this part of the curve. Jumping through the window now meant the state-owned oil company could put most of its external financing needs behind it this year before heading into a blackout period. Whispers of high 190s were seen offering a 15bp-20bp concession to the underlying curve and generated sufficient interest to allow leads to build a $3bn book and upsize the trade from $750m to $1bn. In the end, the BBB/Baa1 credit came at 105.011 to yield 4.835%, or the tight end of 190bp-195bp guidance. “With current market conditions this deal is fair value,” notes a participating investor. Some accounts however simply saw the reopening as too expensive to draw their interest. “There are more attractive credits on a risk return basis,” notes a London EM investor who passed on the deal. “With Pemex coming in at around 80bp to Mexico on a spread basis we didn’t see this as too exciting,” says another investor. Buyers comprised Mexican, LatAm, US and even European accounts. The quasi-sovereign was brought to market by HSBC, Morgan Stanley and Santander. This comes as Pemex looks to tighten margins by another 50bp on an outstanding US$3bn plus dual-tranche loan.
Category: Bonds
Venezuelan Supply Talk Gets Louder
Talk of an imminent Venezuela bond continued to swirl Wednesday, with RBS citing local rumors about an up to $4bn 12% 2031. The specific details associated with market chatter suggests that there may be some weight behind the rumors, though several shops including RBS say the sovereign is under no pressure to issue. If the sovereign were to issue a new 2031, RBS calculates that it will likely be priced at 101.00, but with a fair value yield to maturity and secondary level of 14.8% and 82.20, respectively. Such USD deals are typically sold at the official FX rate to locals who arbitrage against the weaker parallel rate by selling the bonds to foreigners at a steep discount. It is thought that the government will opt for a longer dated bond to smooth out debt maturities. Nomura, however, believes that the issuer may well be targeted at importers in need of dollar assets and could come in a single transaction. However, the shop has its doubts about an imminent issue partly because the Minister of Planning and Financing Jorge Giordani has expressed opposition to such issues. That said, Nomura expects more supply later in the year as the government seeks to replenish the Sitme, the state-run FX system.
CFE Plans Domestic Retap
CFE is planning to reopen for a second time its domestic 2014 and 2020 bonds, with pricing expected as soon as August. It does not state the amount. It originally sold the notes for MXP5bn and MXP9bn, respectively in December, before reopening in January for MXP4bn each. The 2014 is a floating-rate bond paying the TIIE plus 26bp, and was reopened in January at 100.338. The 2020 pays a fixed 7.96% coupon and was retapped at 97.808. The Mexican state-owned utility is raising the funds for general corporate purposes. Banamex, BBVA Bancomer and Ixe are managing the sale.
Mexichem Preps Local Floater
Mexichem is preparing a local floating-rate bond, and eyeing a September pricing. The petrochemicals producer has filed for up to MXP2.5bn ($215m) in 2016 bonds paying interest at a spread to the TIIE. Mexichem is raising funds to repay bridge loans from 4 banks that it used to take out MXP2.5bn in 2014 debentures. The foursome, Banamex, BBVA Bancomer, HSBC and Ixe, are managing the new sale. Mexichem is rated AA /Aa3 on a national scale.
OHL Unit Gets MXP Loan
An OHL Mexico-owned toll road has signed an MXP4.0bn ($345m) loan to help fund construction. The Via Rapida Poetas, 50% owned by the Spanish infrastructure specialist’s Mexican spinoff, got a 17-year loan paying an average of TIIE+300bp, says an investor relations official. He adds that the plan is to swap this to a fixed rate, though there are no details yet. Banorte and the government-backed Fonadin are the lenders. Proceeds are marked for the construction of 5km portion of a toll road on the periphery of Mexico City.
QG Tests Appetite at 5.5% Area
Queiroz Galvao Oleo e Gas (QG) emerged with official guidance of 5.5% area Tuesday for a new $700m 7-year amortizing bond with a 3.8 year average life after securing solid anchor orders. Pricing is expected as soon as today. At those levels, some see OG as a screaming buy especially considering the bond’s 4-year average life and the 200bp plus premium to Petrobras’s 2016s which have been trading around 3.5%. Further positives include the Baa3/BBB minus rating and a collateral package that carries a first priority lien on all the issuer’s tangible assets and project accounts. Odebrecht’s similarly structured 2021s (BBB/Baa3) were also seen as an obvious comp, although they are longer dated. They were trading Tuesday at around 5.36%. OG’s amortizing bond with a 3.8-year average will be used to refinance debt incurred through its Atlantic Star and Alaskan Star drillships which both have long-term contracts with Petrobras. Odebrecht’s issue was used for similar purposes though its vessel was a new build. It marked the first large scale bond of this kind and raised hopes that similar infrastructure trades would follow suit. Earlier Schahin Engenharia had also completed a smaller $270m 2016 deal in October 2010 to refinance debt on the operating Lancer drillship in a BBB rated deal, which priced to yield 5.85%. Queiroz wrapped up investors meetings in Europe Monday for its 144A/RegS project bond. The contractor and provider of offshore and onshore drilling and production services in Brazil has mandated HSBC and Santander as global coordinators on the sale, with Citi coming in as a bookrunner.
Transener Holds New York Meetings Today
Argentine utility Transener will meet investors in New York today after visiting accounts in Boston yesterday as it looks to market a new 2021 that is part of a debt exchange and buyback of its existing 2016s. The borrower is looking to pay a nominal annual rate of 9.75% on an up to $148.6m issue, with books on the trade open until July 25, according to a local regulatory filing. Investors can exchange the existing bonds for the new 2021s par for par, and receive an extra $30 for each $1,000 if tenders are submitted by the early bird date of July 25. Alternatively, they can cash in the existing bonds and receive $910 for each $1,000 in principal, plus another $90 in early bird premiums. The company is also seeking consents to amend terms and conditions on the outstanding bonds. The final size of the issue could be higher depending on the success of the liability management operation, but it cannot exceed the $300m ceiling set by the program. The exchange offer expires on August 9. The 2016s were originally issued in 2006 with a $220m size and priced at par to yield 8.875%. Citigroup and Deutsche Bank led that transaction and are also acting as leads on this occasion.
Venezuela to Issue up to $6bn in 2011
Venezuela is expected to issue an additional $5bn-$6bn in debt between Pdvsa and the Republic, according to a report by JPMorgan. “We would not expect a fundamental change in the overall policy framework that uses excessive USD issuance to locals to help prop up an overvalued FX rate until after the 2012 elections,” the bank says in the report. New bonds are expected to come wide by as much as 100bp. The 5.3 implied exchange rate requires the sovereign to issue relatively high-priced dollar bonds, though the finance ministry could potentially balk at the need for high coupons, according to the report. Pdvsa reopened $1.8bn of its 2013 bonds at the end of June, just weeks before paying the remaining $2.45bn maturity on its 2011s.
Bco Industrial Whispers On 10-Year
Whispers on Guatemala’s Banco Industrial were being heard at low to mid 8s Tuesday on a $150m-$200m 10-year Tier 2 bond, with pricing expected as soon as today. The lender wrapped up roadshows last week with Bank of America Merrill Lynch. The notes are secured by a subordinated loan from Bank of America to Banco Industrial, according to Fitch which has assigned an expected BB- rating to the offering. The US bank is transferring its rights to the loan to a trust, which in turn pledges the loan as collateral. Considered Guatemala’s largest bank, Banco Industrial has a Baa3 local and Ba2 foreign currency rating from Moody’s. The company’s last foray into the debt capital markets was a $30m 60-year NC10 priced at par to yield 9% in 2008 through Credit Suisse.
Braskem Prints 30-Year Bond
Brazil’s Braskem came with its long-expected 30-year bond Tuesday, marking the first LatAm issuer to venture this far up the curve since Pemex printed a long bond in May. It had been thought that the price-sensitive borrower had relinquished the idea of issuing into what has been a buyer’s market. But a rally in US Treasuries Tuesday opened a clear window and the petrochemical concern sallied forth. The capped $500m size no doubt helped generate some momentum as leads tightened initial talk of 7.375%-7.50% to 7.25%-7.30% before finally pricing the RegS/144A bond at 98.479 with 7.125% coupon to yield 7.25% or 308.1bp over UST. That was a touch wide to secondary levels on what was considered the closest, albeit slightly higher rated, comp Votorantim Cimentos (Baa3/BBBminus/BBB), which had 7.25% 2041s trading at around 7.16% or 297.6bp over. Leads were heard arguing that Braskem only paid for the credit spread to extend from 10 to 30-year, while others calculated it came with a 10bp new issue premium. “UST rallied 12-15bp during execution so it is hard to put a pin it,” says one rival banker referring to the new issue premium. In the end, final results were seen as tight but fair on what is now a Baa3/BBB minus/ BB+ credit. “The deal priced way too tight but it did well,” says a participating EM investor. Final book size reached $3bn with emerging market accounts (65%) and high-grade investors (35%) participating. Braskem’s 30-year follows placement of its 2021 $750m notes in April 2011 and $450m in perp bonds callable in 2015 issued in September. Investors say Braskem could have easily tapped its 2021s or created a new 10-year benchmark but it had long harbored hopes of issuing a 30-year. While rival bankers generally liked the trade, some questioned the logic of a 30-year when its perp was readily available. “Their perp is trading at 7.20% with a 7 3/8% coupon. For the same price they had the option to never repay the principal and restrike the coupon lower,” says th