LatAm debt defies expectations to end tighter
NEW YORK, Oct 1 (IFR) - LatAm sovereign and corporate debt ended better bid Tuesday after holding up against weaker US Treasuries and tightening some 3-7bp tighter despite expectations to the contrary.
Higher prices were partly due to some short-covering after the expected sell-off on today's partial US government shutdown failed to materialize, said a New York-based trader.
Markets may also get some temporary relief from tapering fears - or at least that is the assumption among some traders who reason that the shutdown will stop key employment data from being released on Friday.
Among sovereigns, Brazil 2023s were closing about 10ct higher at 87.85-88.10, while Mexico followed a similar path higher to hit 99.80 mid-market. Five-year protection rallied a touch, with Brazil tightening about 3bp to 170bp-175bp and Mexico 2bp to 118bp-122bp.
In the high-beta space, Boden 2015s dropped several points to 92.50-93.00 - mostly because it is now trading ex-coupon after a recent interest payment. Meanwhile, Venezuela 2022s continue to drift lower to end the day at 99.45-99.95.
On the corporate side, Caixa Economica Federal's 4.50% 2018s finally caught a bid to close at 99.50-99.60, putting them above a reoffer of 99.330. BNDES's new 2022s were also up 1/4pt to end at 100.50-100.80.
Meanwhile, market uncertainty stemming from the debt debate in the US is starting to claim its first victims as investor pushback forces sub-investment grade credits to adjust pricing terms or postpone deals altogether.
Mexican consumer finance company Credito Real threw in the towel today on its US$300m five-year non-call three, citing market conditions for postponing the transaction.
Mexican Marine oil services company Oceanografia returned to print a US$160m five-year bond at par to yield 12%, but only after readjusting pricing terms and cutting the size in half.
Just last week the borrower postponed the transaction after failing to garner sufficient demand despite downsizing it to USD280m from USD300m and offering a higher 12% coupon.
The amortizing structure was also changed to take place in quarterly installments of USD8.5m beginning in 12 months after the settlement date. Previously it involved USD8.4m payments starting 24 months after the settlement date.
The bond was originally secured by a first lien mortgage on two subsea vessels - OSA Goliath and Caballo Marango - the same names given to the two joint issuers, which are wholly owned subsidiaries of Oceanografia. The final structure only had the OSX Goliath backing the bond.
Barbados has also extended the deadline on its debt tender until 11:59pm tonight after receiving about USD144m in valid tenders on its existing 7.25% 2021s and its 7.00% 2022s.
The sovereign is looking to fund the up to USD250m tender through a new October 2025 benchmark bond, with initial price thoughts set in the 8.75% area. As of the original expiration date of September 30, Barbados had received USD57.538m in tenders for the 2021s and USD86.223m on the 2022s.
Holders who tender before the new expiration date will receive a total consideration of USD980 per USD1,000 in principal on the 2021s and USD960 on the 2022s.
The sovereign's roadshow ended yesterday. Deutsche Bank is acting as lead, with CIBC coming in as co-manager. Expected ratings are Ba1/BB+.