Venezuela, PDVSA bonds under pressure but still up year to date; EM enjoys solid support

By Rebecca Melvin

New York, Jan. 19 – Venezuela bonds were under pressure on Friday at the conclusion of a week of negative news for the Latin American country related to declines in oil output, looting and deaths related to both looting and political opposition.

Venezuela’s daily production fell by 216,000 barrels to 1.6 million in December, representing the 15th consecutive monthly decline, according to statistics of the Organization of the Petroleum Exporting Countries reported on Thursday. For the year, Venezuela saw a 300,000 barrel per day drop to 2.073 million bpd in 2017 from 2.373 million bpd from the year earlier.

An army general is currently at the helm of the state-owned oil company, Petroleos de Venezuela SA, following a purge of oil company managers by the Maduro regime on alleged corruption charges. About 70 PDVSA senior managers have been jailed in the last three months, according to reports.

The situation has left market observers wondering if a lack of leadership with industrial experience will create further output declines for PDVSA, which accounts for about 95% of Venezuela’s revenue stream.

There were also reports of worsening shortages in the country in January and incidents of looting. And a group of oil workers posted a video saying they are not protestors but workers who said they are suffering from a lack of basic products and deserve a living wage. On Monday rebel leader Oscar Perez was killed in a government raid that has heightened tensions in the politically divided nation.

Venezuela’s bonds due 2020, 2024, 2025 and 2026 and PDVSA notes due 2023 and 2024 were down 0.5 to 0.8 point on the day; but they are still up for the year, according to New York-based market sources.

The Venezuela 6% notes due 2020 traded down 0.8 point to 25.3 bid, 25.8 offered on Friday afternoon. The Venezuela notes due 2023, 2024, 2025 and 2028 were also trading with a 25 handle. Those prices are well off their lows seen in the upper teens to around 20.

Meanwhile, the nearest dated bonds were a little higher, with the Venezuela 13% notes due 2018 notes at 40 bid, 42 offered and the Venezuela 7% notes due 2018 at 32 bid, 34 offered.

Emerging markets overall were “very well supported” with “good demand,” a London-based trader said on Friday of the week’s activity.

U.S. Treasury bonds slipped this past week leaving rates higher. The yield on the benchmark 10-year notes was 2.66% at the end of the day Friday, which was up from about 2.53% at the start of trading on Tuesday, following closed U.S. financial markets on Monday in observance of Martin Luther King Jr. Day.

Investors began to turn their attention to next week’s business. Deals on the calendar for next week include Turkey’s Fibabanka AS, which plans to price $500 million of five-year senior notes. Fibabanka has investor meetings being organized by Citigroup, ICBC and Standard Chartered Bank. There is also the potential deal from Egypt, which is rumored to be announced in the next couple of weeks.

In Latin America, Brazil’s Natura Cosmeticos SA announced plans to price a debut cross-border offering of dollar-denominated notes; Genneia SA plans to price a tap of its 8¾% notes due 2022; Argentina water utility Agua y Saneamientos Argentinos SA mandated Citigroup, Deutsche Bank and HSBC to arrange a series of fixed-income investor meetings beginning on Monday for a dollar-denominated offering of five-year notes under Regulation S only; MSU SA plans to price a dollar-denominated offering of notes; and Unifin Financiera SAB de CV plans to price up to $250 million of subordinated perpetual notes with proceeds going toward working capital and to expand the business of the Mexico City-based leasing company.

© 2015 Prospect News.
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