Eldorado pulls notes offering; Latin America primary looks positive; Venezuela eyed

By Rebecca Melvin

New York, Feb. 8 – The postponement of Eldorado Brasil Celulose SA’s proposed offering of senior notes leaves only one deal on the forward calendar for Latin America next week. But the new issue market for the region is still deemed to be positive, according to market sources on Friday.

Banco BTG Pactual SA’s proposed offering 10-year tier 2 subordinated notes, which are non-callable for five years, is the sole deal on the LatAm calendar at this time.

“Recent pricings have been fairly positive for issuers. We’ve seen Credito Real and others, and it’s been a good start,” a New York-based market source said.

Mexico’s Credito Real SAB de CV Sofom ER priced $400 million of 9½% notes due 2026 (//BB+) at par on Feb. 1, and those notes rose in trade in the aftermarket.

“The market is looking much stronger,” the source said, adding that there are a number of companies likely to take advantage of current conditions after being faced last year with periods when the new issue window was essentially closed due to market volatility and currency woes.

The situation surrounding the Eldorado deal was company specific and unrelated to market conditions, the source said.

The Brazilian pulp and paper company postponed its planned offering of senior notes (expected ratings: Ba3//BB-) after a shareholder filed an injunction against the sale, citing informational inaccuracies contained in the prospectus.

New issues continued to trickle through in the emerging markets debt market this past week for the first week of February, but volume was lighter than usual with China’s financial markets quiet owing to the Lunar New Year holiday.

Next week in addition to Banco BTG, there are a pair of deals on the calendar for the Central & Eastern Europe region and one for the Middle East and Africa. For the CEE, Credit Bank of Moscow plans to price a euro-denominated offering of three- to five-year notes via bookrunners Citigroup, Societe Generale, Gazprombank, ING and Sova Capital. Roadshow meetings for the deal began on Thursday for the Moscow-based commercial and consumer bank.

Uzbekistan is also planning to price its debut international sovereign deal with an offering of five- to 10-year notes.

For the MENA, Mashreqbank PSC, a United Arab Emirates privately owned bank, plans to price a U.S. dollar-denominated benchmark offering of five-year notes.

Venezuela eyed

In the LatAm secondary market, there was no trading of Venezuela’s sovereign bonds for the week by U.S. market players after U.S. sanctions were imposed last weekend. The move, which came on top of sanctions on Petroleos de Venezuela SAB de CV, come as the United States and other countries step up pressure to force Venezuela president Nicolas Maduro from power.

Many in the international community believe that Venezuela’s 2018 elections, in which Maduro was elected to another term, were illegitimate and are backing the opposition leader Juan Guaido, who proclaimed himself interim president two weeks ago. Meanwhile, the country continues to see chronic food and medicine shortages, deterioration of basic services, hyper inflation and lowered economic output including lower oil production.

The slow-moving crisis has left market players uncertain of what the future holds. Trading in the bonds of the debt-laden country, which is in default on many issues, had recently picked up in terms of volume and prices amid increasing expectations of regime change.

Current holders of the bonds are mainly hedge funds and speculators, a New York-based trader said, so the sanctions don’t affect the rest of the debt market that much. “There is different money shaping it,” the source said.

If JPMorgan decides to drop the bonds from its emerging markets bond index, then there will be market players that will have to immediately sell those, but with the sanctions they won’t be able to. “They are arguing their case,” the market source said regarding the bondholders. “It’s a precarious situation.

“But if things go well, there is a lot of money to be made in those bonds. There is still a lot to play out; it’s not simple, and there is a lot at stake for the country,” the source said.

“Most people don’t interact in the [Venezuela] bonds. There are only some buying it to play the crossroads facing the country. After this many years, no one knows how long it will take. But who knows? Maybe in three or four years, Venezuela comes back to the capital markets,” the market source said.

The weight of those bonds is certainly weighing on bondholders, but as for the weight on the EMBI, “it’s not drastic enough to severely impact the whole market,” a market source said.

© 2015 Prospect News.
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