Venezuela, PDVSA sell-off intensifies; new JSL notes trade a little above issue price

By Rebecca Melvin

New York, July 20 – Selling intensified in Venezuela and Petroleos de Venezuela SA bonds on Thursday as investors continued to weigh the specter of potential sanctions against the country by the United States and possibly other nations.

Trump administration officials said on Tuesday that they are considering penalties, including another round of personal sanctions and economic ones such as barring oil imports from Venezuela – the third largest supplier of foreign oil to the United States after Canada and Saudi Arabia – if Venezuela’s president, Nicolas Maduro, proceeds with plans to rewrite the country’s constitution.

The U.S. is also discussing potential multilateral actions to disrupt Maduro’s efforts to consolidate power and repress opposition.

The discussion of sanctions increased after Sunday’s decisive referendum of the Venezuelan people against the government, and after president Trump said on Monday that the U.S. will not stand by and let Venezuela’s democracy “crumble.”

If oil sanctions are imposed, investors believe defaults on Venezuela’s sovereign debt and that of its state-owned oil producer, PDVSA, are inevitable.

PDVSA’s near-dated 8½% notes due 2017 were indicated at 80¾ bid, 81¾ offered on Thursday, which was down from 83¼ bid, 84½ offered on Wednesday, according to market sources. That bond was 91 bid, 92 offered on June 5.

Possible sanctions, which were tied to Maduro going ahead with a July 30 vote to form a constituent assembly tasked with rewriting the country’s constitution, seemed to boost trade in other potential crude oil producers, including those of Mexico and Brazil. Colombia has also been cited as a potential supplier of U.S. oil needs.

“Venezuela is the whole thing right now, but everything else is doing better,” a New York-based trader said, citing the bonds of Mexico and Petroleos Mexicanos SAB de CV and Brazil’s Petroleo Brasileiro SA.

Petrobras’ 8 3/8% notes due 2021 were up at almost 113 at the end of Thursday, which was the high end of its Wednesday range.

Pemex’s 5½% notes due 2021 were at 106.55, which was up from 105.5 to 106 in recent sessions, according to Trace data.

In the primary arena, the new JSL SA 7¾% notes due 2024 were mostly flat in active trade after the Brazilian conglomerate priced $325 million of the seven-year paper via subsidiary JSL Europe SA. The issue price was 99.337.

The new JSL notes were “busy,” but pricing was only just slightly better at 99.5 bid, 100 offered, compared to issue.

“It was busy, but the market is focused on Venezuela right now, and those bonds are obviously under pressure,” a New York-based trader said.

In other emerging markets, there was a new deal priced by Israel’s Partner Communications Co. Ltd., which sold NIS 254.55 million of series F debentures due June 25, 2024 at par with a coupon of 2.16%, and Banque Ouest Africaine de Developpement, or the West African Development Bank, which launched and priced $850 million of 5% 10-year senior notes at 98.074 to yield 5¼%. Pricing of the Africa bank bond came after European markets closed.

Meanwhile, Topaz Marine SA’s five-year notes, which priced with a 9 1/8% yield on Wednesday, were in trade on Thursday and seen closing at 100.12 bid, 100.32 offered after first-day trading.

Also in the Middle East, a deal was added to the calendar from Turkey’s Odea Bank AS. The lender is seen offering tier 2 capital notes as part of next week’s business, a sellsider said.

In established issues, Qatar credit strengthened slightly and its credit default swaps tightened by a couple of points, the sellsider said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.