%VENûSO û!RUBAûHASûSEENûPUBLICûlNANCESû
suffer with gross public debt standing at
86.8% of GDP, according a Fitch report
released in May.
Last month, S&P revised the outlook on its
BBB+ sovereign rating to negative, citing a
rising debt burden. Fitch already rates it
BBB-, with a negative outlook.
h4HEûNEGATIVEûOUTLOOKûREmECTSûATûLEASTûAû
one-in-three chance of a downgrade within
the next two years based on the risk of a
worsening government debt burden,” S&P
said.
Fitch said that US$187m in external
borrowing was approved earlier this year as
THEûISLANDûLOOKSûTOûRElNANCEûAûMATURITYû
falling due in August.
Aruba was last in the dollar market in
2012 when it was rated A/BBB and issued the
US$253m 2023 bond at par to yield 4.625%,
or 295.6bp over Treasuries, according to IFR
data.
Last week, the 10-year bond came at a
spread of 355.1bp over Treasuries. The bond
matures on January 31 2029, with a target
funding date of August 7.
Credit Suisse and CIBC were leads on the
bond.
BRAZIL
GENERAL SHOPPING UPS PURCHASE
PRICE ON BOND TENDER
GENERAL SHOPPING E OUTLETS DO BRASIL has
increased the purchase price on an up to
US$90m cash tender for its 10% perpetual
bonds.
The company, formally known as General
Shopping Brasil, had been offering holders
a buyback price of 95.00 if they validly
tender by the early-bird date of July 24.
But it is now offering par to holders
if they tender by an expiration date of
August 7.
The buyback is subject to the company’s
ABILITYûTOûlNANCEûTHEûTENDERûFROMûTHEû
release of funds held in escrow guaranteeing
secured debt that General Shopping intends
to repay through a credit line.
Dealer managers are Merrill Lynch, Pierce,
Fenner & Smith and Itau BBA.
TRINIDAD & TOBAGO
BANKS TALK TO PETROTRIN AS CLOCK
TICKS ON HEFTY BOND MATURITY
Banks are talking to Trinidad’s PETROTRIN
about how to tackle a hefty bond payment
next year as markets fret about just how the
TROUBLEDûSTATE
OWNEDûOILûlRMûWILLûSTAYû
current on its debt.
Such concerns have weighed on the
credit’s curve, which has suffered
substantial price declines this year as some
question the long-held belief of government
support.
“The market is concerned,” said Omar
Zeolla, a credit analyst at Oppenheimer
& Co.
“It seems the government is not willing to
give a guarantee and they are telling the
company to go out on its own and
RElNANCEv
The 2019s, which have US$850m
maturing on August 14 next year, were
trading as low as 98.00 last week, down from
107 on January 2, according to MarketAxess
data.
Once investment grade, the company has
suffered a steady decline in its credit quality
AMIDûPOORûlNANCIALûRESULTSûANDûRISINGû
leverage.
With the maturity date just a year away,
EFFORTSûAREûNOWûBEINGûMADEûTOûlNDûWAYSûTOû
address the sizable bond payment, not to
mention other maturities such as US$750m
in outstanding 2022s.
“There are number of local and global
banks already talking to Petrotrin about
restructuring the bonds and general liability
management,” said a Caribbean investment
banker based in Trinidad.
“The solution may be a combination of
these options and these players.”
While part of the decline in the 2019 bond
is the natural pull-to-par near maturity, a
widening spread to the sovereign could
REmECTûDOUBTSûABOUTûTHEûGOVERNMENTSû
willingness to act as payer of last resort.
“The drop is not your natural course of
price decay down to maturity,” said a trader.
“If you compare the yield to where the
sovereign is trading it is a sizable spread
(differential).”
At a secondary yield of about 10.40%, the
2019 spread differential to the sovereign’s 2020
is now 660bp versus just 148bp in early May.
It is a similar story further up the curve
where the Petrotrin 6% of 2022s is being bid
at around 9% versus a 4.45% bid on
Trinidad’s 2024s.
That stands in contrast to other oil-rich
nations in the region like Mexico and Brazil,
where the spread between the sovereign
and state oil companies is in the 145bp-
150bp range.
“They don’t have enough cash to meet the
US$850m maturity that is due in August
next year,” said Michael Roche, an emerging
MARKETûlXED
INCOMEûANALYSTûATû3EAPORT
Roche calculates that as of March 31,
Petrotrin had just US$144m of cash against
total debt of US$1.728bn, giving a net
leverage ratio of 8x.
The US$850m maturity is part of over
US$1.2bn of debt Petrotrin owes betweennow and September 2019, according to
-OODYSûWHICHûDOWNGRADEDûTHEûlRMûAû
notch to B1 over a year ago.
In April, S&P also revised its outlook on a
BB rating to negative from stable, citing
RElNANCINGûRISKS
Yet while the government has shown a
reluctance to provide fresh capital, many
assume - including the rating agencies - that it
would ultimately come to Petrotrin’s rescue.
“I don’t see how the government would
allow a default as that would impact the
government’s credit quality,” said Zeolla.
Indeed, the importance of the energy
sector, which according to S&P accounts for
a third of government’s revenues and
almost 80% of exports, makes Petrotrin’s
WOESûDIFlCULTûTOûIGNORE
S&P still rates Trinidad BBB+, but moved
its outlook to negative in April.
And it is “keeping an eye” on Petrotrin’s
bond maturities as well as debt from all
STATE
OWNEDûlRMS ûWHICHûCOMPRISEûABOUTû
14% of GDP, said Julia Smith, S&P’s primary
sovereign analyst.
While that debt isn’t guaranteed by the
government and hence isn’t a factor in debt
analysis for the sovereign rating, “we are
incorporating the risk the sovereign faces on
this debt,” she said.
The government has recently appointment
a new board with a mandate to bring
0ETROTRINûBACKûTOûPROlTABILITYûANDûIMPROVEû
performance, but that could take years.
“Local banks are waiting to see what
reports Petrotrin’s board will issue about
formal plans to restructure and resuscitate
the company,” said the Trinidad-based
banker.
“The government will do whatever is
necessary to ensure that the bond payment
DUEûINûûISûSATISlEDû4HISûISûAûMUST ûASûTHEû
way this is handled will impact the
sovereign and NGC (the National Gas
Company of Trinidad) as global bond issuers
also.”ALL INTL EMERGING MARKETS BONDS
BOOKRUNNERS: 1/1/2018 TO DATE
Middle East
Managing No of Total Share
bank or group issues US$(m) (%)
1 Standard Chartered 31 8,146.50 13.5
2 Citigroup 15 5,800.56 9.6
3 HSBC 24 5,610.43 9.3
4 Deutsche Bank 7 4,152.37 6.9
5 JP Morgan 8 3,544.32 5.9
6 Barclays 10 3,062.96 5.1
7 Credit Suisse 7 2,571.38 4.3
8 Al Khaliji Commercial Bank 2 2,082.76 3.5
9 Goldman Sachs 3 1,930.39 3.2
10 Credit Agricole 8 1,830.20 3.0
Total 68 60,265.04
Excluding equity-related debt.
Source: Thomson Reuters SDC code: L5