Venezuela’s Central Bank is scheduled to complete the auction today of $330m in previously issued PdVSA 2035 dollar-denominated bonds through the SICAD currency exchange system, and the use of bonds suggests a government pragmatism that could mean new issuance ahead. With the government pressured by stagflation and other difficulties this year, many analysts had been predicting such a shift since the election of President Nicolas Maduro in April. Jefferies says it is a “fair assumption that officials will deplete the $1.7bn stock of PdVSA’35 and then shift towards new issuance.” If officials plan to hold $300m-plus bi-weekly auctions, then the shop sees new issuance as soon as three months from now. Also, this week’s $330m amount represented an increase from $200m. “After opening this door, the government makes it possible that future issuances (by PdVSA, since the republic cannot legally sell the bonds to BCV) might be used to provide hard currency to the private sector through SICAD rather than issuing directly in the international market,” Barclays says. PdVSA has not issued in the broader markets since May of last year, when it sold $3bn in the 9.75% 2035 bonds via Citi, according to Dealogic data. The Venezuela sovereign has not conducted a sale since a $3bn 11.75% 2026 deal through Credit Suisse, in 2011.
Category: Venezuela
CAF Pouches Kangaroo Funds
Corporacion Andina de Fomento (CAF) has raised AUD275m ($249m) in Australia’s bond market, becoming the first Kangaroo bond issuer from LatAm, and the second in AUD. The development bank drew AUD320m in demand, allowing it to upsize from AUD150m expectations. “We are very satisfied with the debut transaction which represents diversification and opening of a new market, and at a good cost,” CFO Hugo Sarmiento tells LatinFinance. The official calculates the new deal priced 30bp inside CAF’s dollar curve. He says the institution plans a regular presence in the Kangaroo bond market, with a second AUD transaction likely in 2014. The AA minus/Aa3/A+ rated supranational priced the 2016 bond at 99.387 with a 4.25% coupon to yield 4.47% or mid-swaps plus 135bp, in line with MS+135bp area guidance. Pricing was an exercise in price discovery for the AA minus/Aa3/A+ rated supranational, as high-grade Australian investors have mostly invested in AAA supranational paper, Sarmiento notes. Of 30 total orders, Australian investors represented 33%, Japanese 27%, ex-Japan Asians 26%, Europeans 9%, and Americas buyers 6%. The deal follows investor meetings in Sydney and Melbourne and separate meetings with Japanese investors in Tokyo. Pemex opened the AUD-denominated market last year, though its AUD150m 2017 was done under a general Euro program. CAF’s transaction is considered a true Kangaroo bond as it falls under a AUD2bn Australian medium-term program. Deutsche Bank and Westpac Institutional Bank managed the deal. CAF previously raised CHF250m ($265m) in new 2020 bonds in Switzerland, at a 1.557% yield, which followed a HKD940m ($121m) 2028 private placement in Hong Kong at a 4.27% yield.
Maduro Chooses Third CB Head of 2013
Venezuelan President Nicolas Maduro has named Eudomar Tovar as head of the country’s Central Bank, according to the government information ministry. Tovar replaces Edmee Bethancourt, who had held the position since April after replacing current Finance Minister Nelson Merentes. He had been head of state currency board Cadivi and was previously a Central Bank vice president. No reason was given for Betancourt’s departure.
CAF Hones AUD Bond Plans
Corporacion Andina de Fomento (CAF) has wrapped up three days of fixed-income investor meetings in Australia, ahead of what it hopes to be an AUD-denominated bond debut as early as 4Q, CFO Hugo Sarmiento tells LatinFinance. The Venezuela-based development bank spent two days in meetings with fixed-income accounts in Sydney and one day in Melbourne ending last week. CAF is targeting Australian high-grade investors looking for LatAm exposure. “Investor feedback was positive. There is interest in indirect exposure in Latin America via a supranational with preferred creditor status,” Sarmiento says. He declines to discuss any specific goals for size and tenor. He says that pricing is expected to be an exercise in price discovery for AA minus/Aa3/A+ rated CAF, as high-grade Australian investors have mostly invested in AAA supranational paper. A mandate has yet to be decided, though CAF was escorted in Australia by one bank, he adds, declining to identify it. CAF last raised CHF250m ($265m) in new 2020 bonds in Switzerland last week, at a 1.557% yield, which followed a HKD940m ($121m) 2028 private placement in Hong Kong at a 4.27% yield. A deal in Australian dollars would be the second-ever by a LatAm borrower, following Pemex’s AUD150m ($156m) 2017 bond sold in April 2012. The 6.125% coupon Pemex bond priced at a 6.193% yield.
CAF Returns with CHF Bond
Corporacion Andina de Fomento (CAF) has raised CHF250m ($265m) in new 7-year bonds in Switzerland, according to sources following the process. The AA minus/Aa3/A+ Venezuela-based development bank priced the 2020 at 99.621 with a 1.500% coupon to yield 1.557%, or mid-swaps plus 50bp. Proceeds will be used to make an August 13 redemption of CAF’s 5.0% CHF200m 2013 bond, the lender’s first-ever bond in the Swiss Franc market. Credit Suisse managed. CAF has issued CHF600m in the Swiss market this year. It raised CHF250m in new 2021 bonds in January, pricing at 100.094 with a 1.375% coupon to yield 1.363%, or mid-swaps plus 55bp. CAF Officials have previously said the bank continues to analyze the USD, EUR, GBP and JPY markets this year. Tuesday’s deal follows a HKD940m ($121m) private placement in Hong Kong last week.
CAF Returns for HKD
Corporacion Andina de Fomento (CAF) has returned to the Hong Kong bond market, with a HKD940m ($121m) private placement, according to people familiar with the sale. The Venezuela-based multilateral lender’s 2028 priced at par with a 4.27% coupon. HSBC led the transaction. CAF raised its first-ever HKD bond sale in March 2012, pricing a 2022 bond at 4.03%, also through HSBC.
Venezuela Lowered
S&P has lowered Venezuela’s credit rating to B from B+, it says, based on challenges the agency sees to the post-Chavez government’s ability to implement policy. “Political polarization and internal challenges within the Venezuelan government threaten to weaken the implementation of economic policies at a time of worsening economic conditions with decelerating GDP growth, increasing inflation, and growing pressures on external liquidity,” S&P says, noting that the uncertainty threatens governability. GDP growth is decelerating sharply in 2013, and S&P expects it to approach zero. Inflation may reach near 40% by year-end. The outlook is negative. Moody’s has had its B2 rating on negative outlook since January, and Fitch’s B+ has been negative since April.
PdDVSA Adds Chinese Funds
Petroleos de Venezuela (PdVSA) has signed a $4.15bn loan agreement with the China Development Bank, it says, to increase production at the Sinovensa joint venture. Financing details weren’t provided, and officials at the state-owned oil producer were not available for comment. The deal follows agreements last month for loans from Rosneft, Chevron and Schlumberger, totaling 4.5bn.
PdVSA Brings in Foreign Funds
As the markets wait to see how Venezuela’s new presidential administration will secure international funding, state-owned oil producer PdVSA has agreed to new debt financing from three sources. PdVSA and Russia’s Rosneft have agreed to form a joint exploration venture in Venezuela, the two say, which includes a $1.5bn loan to PdVSA. The Petrovictoria crude oil and natural gas exploration and production joint venture is to be 40% owned by Rosneft and 60% by PdVSA’s Corporacion Venezolana del Petroleo (CVP) subsidiary. CVP will get the $1.5bn loan, and Rosneft also says it will make a $1.1bn payment in two installments to enter the JV, without giving additional details. The joint venture will as part of the Carabobo-2 project move forward the pair’s development of heavy oil reserves. Carabobo-2 North and Carabobo-4 West blocks are included in the project, with reserves estimated at 40bn barrels, Rosneft says. Separately, PdVSA has agreed to a $2bn loan from Chevron, to support the Petroboscan JV the two have, according to local news and wire reports citing remarks from Oil Minister Rafael Ramirez. The loan pays Libor+450bp, though no details on maturity were immediately available. Also, PdDVSA has agreed to a $1bn revolver from US oil services company Schlumberger. Officials at the companies were not available for comment on the terms of the JV or any of the financing.
CAF Plots Colombia Road Fund
Corporacion Andina de Fomento (CAF) is planning a $1bn collateralized debt vehicle to invest in Colombian roads, an official at the lender says. The transaction will be a first for Latin America and a formula that will allow the development bank to leverage a small investment to fund a broad range of projects. CAF expects to spend the next three months finalizing the structure of the transaction, Victor Traverso, representative director for CAF in Colombia, tells LatinFinance. From there, the multilateral plans to look for other subordinated investors and mandate an asset manager to run the vehicle. CAF is planning on investing up to $75m. It hopes to minimize its contribution, however, by attracting mezzanine and other equity investors. CAF is targeting a $1bn size for the vehicle, comprising 70% senior paper rated double or triple-A, and 30% equity and mezzanine tranches. It is likely to invest in 15-20 projects, either through loans or bonds, says Traverso. “If it works right, we will be able to support a larger number of projects than through funding individual concession,” Traverso says. Colombian road construction concessions will make up the bulk of the vehicle’s investments, but it may buy other deals – potentially in other investment-grade countries - to build a diversified asset pool. The development bank is structuring the vehicle in-house, looking at examples of collateralized debt obligations used to finance infrastructure in the United States as a model. The formula could also be put into effect in other countries and industries, says Felipe Aristizabal, manager in Bancolombia’s investment banking division. “The multilaterals looking at getting involved want to make sure the structure is replicable. The vehicle will have some specific features, but on the whole it will be applicable elsewhere and in other industries,” Aristizabal says. “The success of the program depends on the two or three first concessions that they invest in. If they don’t do it