Lyondell deal buoys Brazil energy names; Korea’s KDB €500 million deal oversubscribed

By Paul A. Harris

Portland, Ore., July 10 – The deeply distressed bonds of Odebrecht SA were slightly better on Tuesday on news reports that Odebrecht plans to sell its controlling stake in Braskem SA to LyondellBasell Industries NV, sources said.

The Odebrecht Finance Ltd. 7 1/8% senior notes due June 2042 were 37 bid, 38 offered on Tuesday.

They traded recently at 36½, a source said.

Braskem bonds have also been buoyed by the news, sources say.

The current price of the Braskem Netherlands Finance BV 4½% senior notes due January 2028 is in the low-to-mid 94 range, to yield between 5¼% and 5.3%, which is inside of the Brazil sovereign.

The Federative Republic of Brazil 4 5/8% global bonds due January 2028 now yield around 5 5/8%, the source said.

Meanwhile, apart from investment-grade sovereign and quasi-sovereign credits the primary market remains shuttered. And even high-grade Asian quasi-sovereigns are showing up with deals of modest size, tending to be under $1 billion, the source added.

Apart from cash outflows from the emerging markets debt accounts and hawkish central banks, the sector labors beneath a steady stream of negative headlines.

These include news that re-elected Turkish president Recep Erdogan adopted new executive powers and named his son-in-law as Turkey’s finance minister, replacing incumbents with whom the markets had been more comfortable.

Also there is domestic turmoil related to austerity measures related to Argentina’s recent loan agreement with the International Monetary Fund.

In addition, elections are pending in Brazil, the source pointed out.

KDB oversubscribed

Korea Development Bank talked €500 million of five-year senior notes (expected ratings Aa2/AA/AA-) at a 40 to 43 basis points spread to mid-swaps.

Final talk comes tight to initial spread talk in the mid-swaps plus low 50 bps area.

The deal was playing to €975 million of orders when talk circulated and is set to price on Tuesday, the source added.

Joint bookrunner HSBC will bill and deliver for the Regulation S registered offer. BNP Paribas, Deutsche Bank, ING and SG CIB are also joint bookrunners.

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