Debt Appetite Lingers as Petrobras Launches

Petrobras has added its name to a heavy new issue pipeline this week, planning a benchmark sized 5, 10 and 30-year transaction. Many smaller and higher-yield names have issued this month, but with only Cemex having offered a $1bn or larger deal, oversupply had not yet been a worry. Petrobras, however, should come for at least $2bn, and perhaps as much as $6bn, according to investors. BTG Pactual, Citi, HSBC, Itau, JPMorgan and Santander are managing the sale, which is being done to raise funds for general corporate purposes and capex. The Brazilian oil company is attempting to knock out all of its 2011 DCM needs in one go, they say. “There is still a lot of liquidity,” says a New York-based EM investor. “The new issue calendar is considerable, but most make sense, and there is still enough room for them in our asset class,” he adds. “Corporates see that there could be a rising interest rate environment ahead, and decide to secure cheap money now before it isn’t cheap any more,” Bevan Rosenbloom, fixed income analyst at RBS, tells LatinFinance. Though the market may be able to absorb the supply, the amount of issuance could mean poorer aftermarket performance than has been seen in recent months, he adds. Two of last week’s larger issuers, Cencosud and CMPC, have failed to pop in the aftermarket as they might have late last year, according to investors. The pair finished Tuesday at 98.5 (versus 98.78 reoffer) and 99.8 (versus 99.52 reoffer), respectively. Baa2/BBB/BBB minus Petrobras plans to price later this week following telephone meetings and a New York breakfast today. Also on tap for this week and early next are Brazilian banks Safra and Daycoval, Colombian utilities Emgesa and EPM – both aiming to do a global COP – Brazil’s Energisa and Grupo Virgolino Oliveira, and Argentine Gaming Group.