November 16, 2015 / 8:49 PM / 2 years ago

LATAM WRAP-Commodity names underperform in illiquid market

NEW YORK, Nov 16 (IFR) - LatAm debt prices were putting in a mixed performance amid light liquidity as commodities remained under pressure and political uncertainty in Brazil weighed on sentiment.

With both Mexico and Colombia out on holiday, flows were exceptionally light on most trading desks, even for a Monday.

Oil’s inability to hold onto earlier price gains left names like Colombian state-owned oil company Ecopetrol drifting lower in an illiquid market, with the 2025s trading about half a point weaker at 91.00-91.50.

Codelco was the clear underperformer when its 2025s gapped out to 278bp-273bp - its widest level since early October - following news the Chilean copper producer would cut the premium charged on the London Metal Exchange by about 26%.

Meanwhile, Brazilian debt was inching wider, including Petrobras 2024s which were being quoted at a mid-market price of 78.00, or about 1/4 points lower.

This follows news reports that had President Dilma Rousseff expressing support for embattled finance minister Joaquim Levy, though his eventual departure is expected by many in the market.

“Most think that it is not a change of person that is needed but a change of culture,” said a trader.

Meanwhile, activity in the primary market was being dominated by liability management trades.

Development bank BNDES became the latest Brazilian financial institution to move forward with a debt buyback on Monday when it launched a tender for up to US$3.75bn in debt.

The bank, which is expected to use cash on hand to finance the tender, is offering a price of 95.11, 97.37 and 93.07 on the 4% 2019s, 5.5% 2020s and the 5.75% 2023s. Those bonds were trading on Friday at 93.75, 96.75 and 91.625, respectively, according to Thomson Reuters data.

“This may be a way for some investors to reduce their Brazil exposure before year-end,” said a banker away from the trade.

This follows a similar announcement by another state-controlled financial entity Banco do Brasil which last week announced a tender for up to US$600m in perps and senior 2022 notes.

Borrowers seeking new money, however, remained sidelined in a market that continues to take a more defensive stance as year-end approaches.

“We have about 22 trading days left to get liquidity,” said a second trader. “That is the reason why investors have been selling into strength.”


Arcos Dorados, the largest McDonald’s franchiser in South America, held a Swiss roadshow in the week ending November 6, via Credit Suisse. The Argentina based and NY listed company is rated Ba3/NR/BB+.

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 REIT Fibra Uno completed meetings with investors through Bank of America, Credit Suisse, HSBC and Santander.

Brazilian airline GOL Linhas Aereas Inteligentes (B3/B-/B-) completed roadshows with Morgan Stanley, Credit Suisse and Citigroup. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)

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