OSX Bond Call Seen Unlikely

Brazil’s OSX is unlikely to call its 9.25% 2015 bonds this year, according to Barclays, which cites direct discussions with management at the Eike Batista-controlled shipbuilder. The decision comes contrary to the market’s expectations. “While we think [fellow EBX unit] OGX has significantly greater price upside potential, we still think OSX 2015s offer an attractive carry at current levels,” the shop says, noting that the bonds trade to yield 7.03% to the next March 2014 call, and 7.18% to the March 2015 maturity. Ultimately, the decision to call depends on management’s financing plans. The OSX-3 drillship requires $240m in capex for completion, with borrowing up to $250m at OSX-1 and issuing 1.5-year mezzanine debt among the options. The 2015 bond was sold in March of last year, raising $500m at a 9.25% yield. Batista put $250m in equity capital into OSX last year, with a matching amount to be done by March of 2014.