EM debt extends gains post Fed; Gazprom, Eldorado, BTG Pactual join calendar; Pemex eyed

By Rebecca Melvin

New York, Jan. 31 – The emerging markets debt market continued to rally on Thursday extending gains notched on Wednesday. More deals joined the primary calendar, but no new deals priced in Latin America or the Central & Eastern Europe Middle East and Africa regions, market sources said.

A London-based trader said the international bonds of the Middle East and Africa region were solid, “with higher beta names doing very well.”

Later a New York-based source suggested the rally may be overdone at this point.

Emerging markets investors were cheered by the U.S. Federal Reserve’s message on Wednesday that it will be patient regarding monetary policy and further rate raises. The U.S. dollar lagged on the news while global stocks and emerging markets bonds strengthened.

On Thursday, Russia’s PJSC Gazprom announced that it is planning to issue dollar-denominated notes and mandated banks and scheduled roadshow meetings to market the deal.

Gazprombank and JPMorgan are joint global coordinators and bookrunners of the notes deal, and Banca IMI, Credit Agricole, Mizuho Securities, Renaissance Capital, SMBC Nikko and VTB Capital are joint lead managers and bookrunners.

Meetings for the Moscow-based natural gas producer’s proposed notes are set to start in the United States on Monday.

For Latin America, Eldorado Brasil Celulose SA and Cellulose Eldorado Austria GmbH plan to price a dollar benchmark of intermediate duration notes. The pulp and paper company selected Banco do Brasil, BTG Pactual, Bradesco and Santander as joint bookrunners, with meetings with fixed-income investors slated to begin on Friday and wrap up on Feb. 6.

The proceeds will be used for liability management, improvements in the company’s debt-maturity profile and general corporate purposes.

Brazil’s Banco BTG Pactual SA also has selected banks and scheduled fixed-income investor meetings for an offering of tier 2 10-year, non-call five, subordinated notes, according to syndicate source.

BTG Bank, Bradesco, Citigroup, Deutsche Bank, Nomura, and UBS are bookrunners for the deal.

The extended roadshow will be held through Feb. 11, with meetings in Asia as well as in the United States.

BTG Pactual is an investment bank and wealth manager based in Sao Paulo.

In secondary market dealings, the actively trading 2027 notes of Petroleos Mexicanos SAB de CV improved after a setback on Tuesday and Wednesday after Fitch Ratings downgraded the state-owned oil company’s debt by two levels to BBB-, citing a lack of investment being committed to reverse declining production.

The downgrade leaves the company’s rating at the lowest investment-grade level, and market sources are beginning to speculate that the company will not be coming to the international bond market for issuance in the next few weeks as had been expected.

The Pemex 6˝% notes due 2027 were trading somewhat better at around 97 on Thursday after sinking to the 94 range this week.

“The bonds have been benefiting from the overall rally but they are still trading very wide,” a New York-based trader said of Pemex.

“I am sure AMLO has plenty of people telling him [what the market would like to see], but it’s going to take a little while to see what happens,” the source said, referring to Mexico’s president, Andres Manuel Lopez Obrador. “Hopefully, he makes some adjustments.”

The source was referring to actions taken by Lopez Obrador, such as canceling the Mexico City Airport project that had already taken in $6 billion from bondholders, that have made financial markets uneasy.

Meanwhile deals on the forward calendar were seen keeping until next week despite looming earnings and blackout periods for many companies.

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