| SAO PAULO, March 3
SAO PAULO, March 3 Bonds of Odebrecht SA
on Friday hit their lowest level in more than six
months as investors feared the spillover of the Brazilian
engineering conglomerate's involvement in a bribery scandal
could hamper planned asset sales and the procurement of new
contracts across Latin America.
Investors have grown concerned about Odebrecht since Feb.
22, when Reuters reported that the company wants to settle
graft-related fines with several Latin American countries before
June to prevent a flurry of upcoming elections across the region
from putting the brakes on a recovery plan.
The price of Odebrecht Finance Ltd's 7.5 percent
dollar-denominated perpetual bond shed 5 cents on
the dollar to 37.5 cents, the biggest intraday decline in 11
months. At that price, yields hit 19 percent, according to
prices compiled by Thomson Reuters.
Bonds guaranteed by Odebrecht's construction unit, Odebrecht
Construção & Engenharia OEC SA, have also suffered in the past
week, along with those from the group's oil drilling unit.
Odebrecht's 4.375 percent bond due in April 2025
fell more than 5 cents on Friday, extending their losses to
about 8 cents in the past week.
In a client note, strategists at Cantor Fitzgerald LP said
such concerns, coupled with investor disappointment following a
meeting with OEC executives this week in Miami, could be behind
the recent bond price declines.
"Further, among the many things that investors are telling
us - and which we wholeheartedly agree - is that at this point,
the company needs more than just new lines of credits and a
couple of major projects to be added to its backlog," the note
A spokesman for Odebrecht did not have an immediate comment
on the Miami meeting.
At this point, the fate of pending asset sales and
refinancing efforts seems increasingly dependent on how quickly
governments decide on penalties for Odebrecht, which admitted to
paying bribes to win projects in recent years.
People familiar with Odebrecht's strategy told Reuters last
week that the company could sell some 6.5 billion reais ($2.1
billion) in project stakes and operating licenses in the region
and Angola by year-end. So far, it has sold about 5 billion
reais in assets out of a total goal of 12 billion reais.
Odebrecht is the largest of the Brazilian engineering
companies accused of colluding to overcharge Petróleo Brasileiro
SA and other state firms for contracts, then using part of that
to channel donations and bribes into Brazil's former ruling
Workers Party and domestic and international allies.
The bribes also reached other Latin American countries where
Odebrecht sought to expand, as part of a strategy to reduce
exposure to home turf Brazil. Prosecutors from 10 Latin American
countries last month formed a task force to share evidence on
how the scheme operated.
Settling plea deals in those countries rapidly is key to
help Odebrecht mitigate reputational and political risks for the
asset plan as elections loom across the region. Of the 10
countries investigating Odebrecht, eight will hold at least one
congressional, regional or presidential ballot in the 18 months
through December 2018.
The scandal has sparked an upheaval in countries like Peru,
where authorities are seeking the arrest of a former president,
or in Colombia, where the company is being accused of financing
the campaign of President Juan Manuel Santos.
In addition to Brazil, Argentina, Chile, Ecuador, Mexico,
the Dominican Republic, Venezuela and Panama, are investigating
the Odebrecht scheme, as are prosecutors from Portugal.
($1 = 3.1370 reais)
(Additional reporting by Tatiana Bautzer in São Paulo; Editing
by Jonathan Oatis)