India’s Axis prices notes; TV Azteca, Iraq on tap; Venezuela, PDVSA continue to melt lower

By Rebecca Melvin

New York, Aug. 1 – Emerging markets saw the launch and pricing of a dollar-denominated benchmark deal from India’s Axis Bank Ltd. on Tuesday. The Mumbai-based lender priced $500 million of 3% notes at a slight discount to par for a yield of Treasuries plus 130 basis points.

There was also initial price talk on a $350 million deal – seven-year notes being issued by Mexico’s TV Azteca SAB de CV in the high-8% to 9% area. That deal is expected to price on Wednesday, according to a syndicate source.

The Republic of Iraq’s $500 million offering of five-year notes was also expected to price on Wednesday.

Meanwhile, Venezuela’s political, economic and humanitarian crisis remained a primary focus of concern, and the nation’s sovereign debt along with that of its state-owned oil company Petroleos de Venezuela SA continued to melt lower.

Early Tuesday word spread via social media that Venezuela government security forces had taken two opposition leaders out of their homes in the middle of the night and that their whereabouts were unknown. President Nicolas Maduro had threatened jail cells for his opponents as recently as Sunday when he celebrated the election of a new National Constituent Assembly.

The seizure of two central opposition leaders, Leopoldo Lopez and former mayor of Caracas Antonio Ledezma, occurred during the night after the U.S. Treasury Department slapped sanctions on Maduro, denouncing him as a dictator presiding over a regime that has committed widespread human rights abuses, mismanaged the economy and engaged in systemic corruption.

Moreover, the U.S. Treasury urged those who were elected to the new constituent assembly not to take office, threatening that those who do will be subject to the same sanctions as Maduro, namely having their U.S.-based assets frozen and having U.S. persons prohibited from having dealings with them.

Venezuela has debt interest payments of about $700 million due this month, and it has about $7 billion of principal and interest coming due in the next five months through December. The country has international reserves of about $10 billion, so in theory the country could make the payments. But given the country’s dire situation, many wonder if Maduro is willing to, and debt markets have been weighing the possibility of default.

While this exercise – looking at a possible default – has been ongoing for a couple of years, the situation has worsened and bond prices have sunk to new lows, a New York-based source said.

Still, one source said that Maduro is likely to keep on paying as long as there is no embargo of U.S. imports of Venezuelan oil. These oil exports are Maduro’s lifeline, and as long as the country can still export, it will still pay, this source believes.

The source also said that an oil embargo is unlikely at this time.

Venezuela has about $70 billion of bonds outstanding and about $100 billion in debt total.

Venezuela’s 12¾% due 2022 moved down on Tuesday to 42 bid, 42½ offered, down from 46 at the beginning of the day, sources said.

The Venezuela 2022s are one of the sovereign’s most liquid bonds and a good benchmark for the curve, a source said, and there appears to be no letup in the selling.

“Last week, the 22s [notes] were 50 and the week before that they were 54. At the end of May, they were 60,” the source said. “No one is going to catch a falling knife.”

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