NEW YORK, Oct 15 (IFR) - Brazilian credits were little-changed on Thursday even after Fitch downgraded the sovereign and Petrobras postponed a local bond sale.
Fitch fell in line with Moody's when it downgraded Brazil to BBB- from BBB - a notch above sub-investment grade.
The agency's negative outlook, however, sets it apart from Moody's, which still has a stable outlook, and makes a demotion to junk in the coming months more likely.
Indeed, Barclays expects either Moody's or Fitch, or both agencies, to demote the sovereign to junk as soon as the first half of 2016, following S&P's decision to cut the country's rating to BB+ just last month.
The market's response to Fitch's downgrade was however muted, with many credits trading a touch lower or even flat on the day after enjoying a strong start to the session.
The country's five-year CDS, for example, widened to 447bp from an intra-day tight of 440bp, but was still 3bp tighter than Wednesday's closing levels.
"People have been buying on dips, though it could be short covering," said a New York-based trader.
Bonds issued by Petrobras, the state-owned oil company embroiled in a widening corruption scandal, were also steady despite its decision to postpone a R$3bn bond sale in the domestic market.
It's 2024s were being spottted at around 77.75-78.75 by early afternoon, or unchanged on the day.
Leads Banco do Brasil, BTG Pactual, Bradesco, Itau and Votorantim had been marketing five, seven and 10-year tranches at respective ceiling rates of CDI plus 185bp, and 80bp and 160bp over government inflation notes NTN-Bs, according to a banker away from the deal.
The beleaguered credit, however, was thought to have struggled to generate strong demand despite generous spreads and the support of pension and mutual funds managed by some of the large state-controlled entities.
"I don't think demand would have been enough for leads to exercise the firm underwriting (agreement)," said the banker. "Banks had expected it to be entirely sold to the market and they didn't want to add exposure to the name."
Markets as such have put little importance in the local bond trade following news that it obtained some US$2bn in lease financing from China's ICBC. So far, management has been able to find creative ways to source funding and cover shortfalls.
Year-to-date Petrobras has raised about US$14.5bn, allowing it to cover the approximately US$15bn needed to address this year's negative free cash flow and debt maturities, according to Oppenheimer.
Peru (A3/BBB+/BBB+) has appointed BBVA, BNP Paribas and JP Morgan to arrange fixed income investor meetings in Europe from October 20 to update on the country's financing programme and discuss developments in the economy. A potential transaction may follow.
Mexican white-goods manufacturer Controladora Mabe has finished investor meetings through Barclays, Bank of America Merrill Lynch, Citigroup and JP Morgan. Ratings are BB+/BB+.
Mexican real-estate investment trust Fibra Uno has completed meetings with investors through Bank of America, Credit Suisse, HSBC and Santander.
Terrafina, another Mexican REIT, has finished meeting accounts as it markets a potential US$400m-$500m bond offering. The borrower mandated Barclays and Citigroup as lead managers, with Itau coming in as co-manager. Expected ratings are Baa3/BBB-.
Brazilian airline GOL Linhas Aereas Inteligentes (B3/B-/B-) has completed roadshow with Morgan Stanley, Credit Suisse and Citigroup. A financing deal may follow, subject to market conditions. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)