Pacific Rubiales bonds plummet after takeover bid is dropped; China recovering, ‘very active’

By Christine Van Dusen

Atlanta, July 9 – Latin America-focused Pacific Rubiales Energy Corp. remained on radar screens on Thursday morning – with its bonds plummeting as much as 12 points – on a Thursday that saw risk appetite begin to creep back after Wednesday’s bubble-burst in the Chinese stock market.

Mexico’s Alfa SAB de CV and Harbour Energy Ltd. on Wednesday announced the withdrawal of their takeover bid for Pacific Rubiales – an offer of $5.11 per share, valued at about $1.7 billion – because they were unwilling to up the bid, even after seeing that a large number of shareholders believed it was far too low.

“This is particularly negative news for Pacific Rubiales bond holders, as the company’s high level of debt and current oil price dynamic will negatively affect its operations,” according to a report from Schildershoven Finance BV. “We warn investors that the risks of investing in the company are high and recommend avoiding it.”

In other news on Thursday morning, Asian bonds were “very active,” led by “extreme moves” in Chinese equity markets, a London-based trader said.

This followed major losses on Wednesday, after some firms halted trading to stem selling and the police investigated short-selling.

“Opened with a very grim tone,” he said. “Chinese financials were 4 basis points to 5 bps wider and are now largely back to unchanged, even 1 bp to 2 bps tighter in some names.”

Other corporates from China were down as much as 10 bps at the open but bounced back by about 3 bps on the day, a trader said.

“Good two-way flows in the Korea space,” he said. “Philippines has been rock-solid, with the long end opening unchanged and rallying a ½ point.”

Indonesia opens soft

Indonesia, however, opened soft on the bid amid poor liquidity, but “looked to be around ¼ point lower to begin with,” the trader said.

“Once China found its footing and exploded higher, Indonesia also caught a bid,” he said. “Investment grade corporates were well-sought after, as China oil names tightened by 5 bps or so on the 10-year front.”

Lat-Am stabilizes

Latin American names stabilized on Thursday, after three days of mostly weaker and wider performance driven by commodity moves, a New York-based trader said.

Brazil-based Vale SA moved 15 bps tighter and Petroleo Brasileiro SA also narrowed, he said.

Traders also reported moving significant amounts of Mexico’s 2023 and 2025 bonds, he said, with mostly selling and some buying in small amounts.

Spreads tighten

At the end of the day, spreads tightened for Latin America, as risk appetite cautiously returned, a trader said.

Credit default swaps spreads from Brazil finished the session at 263 bps from Wednesday’s 267 bps, and Mexico’s ended the day at 132 bps from 137 bps.

Bonds from Venezuela “bounced nicely” off yesterday’s levels, “whereas Argentina continues to consolidate in a range,” he said.

© 2015 Prospect News.
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