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LATAM WRAP-Pacific Exploration bonds outperform in weak markets
September 1, 2015 / 7:27 PM / 2 years ago

LATAM WRAP-Pacific Exploration bonds outperform in weak markets

NEW YORK, Sept 1 (IFR) - Bonds issued by E&P company Pacific Exploration - formerly known as Pacific Rubiales - outperformed on Tuesday despite a selloff in broader markets that was prompted by data pointing to a weakening Chinese economy.

The company’s 2025s have rallied about seven points since Friday to hit 55.00 after commodity trader Trafigura announced on Monday it had upped its stake in the company to around 10%.

Trafigura’s move led to speculation that Mexican conglomerate Alfa may take a more aggressive role in the company’s management or up its stake after shelving a C$6.50 per share bid in July.

Venezuela investment firm O‘Hara Administration had opposed Alfa’s bid, but the two parties appear to be striking a more conciliatory tone following Trafigura’s purchase of 2.2m shares at an average - and lower price - of C$4.42 each.

Alfa owns about 19% of the Pacific Exploration, while O‘Hara now controls about 20% of the company.

The company announced today that it had agreed to nominate representatives from Alfa and O‘Hara Administration as board members.

“It seems like everyone is happy and shareholders are working together,” said an investor.

The buyside is cheering the company’s expansion beyond Colombia, where the contract for its single most valuable asset - the Rubiales fields - is set to expire in 2016. The company announced today that it has been awarded a two-year contract to operate an oil block in Peru.

“The company has been doing the right thing, by selling assets, cutting capex and diversifying away from Colombia,” the investor said.

Meanwhile Brazilian spreads continued to widen on concerns that the government’s move to budget a deficit for 2016 would lead to a more rapid decline in the sovereign’s credit standing.

Fitch warned today that the new deficit target came below its baseline used in April when it revised its outlook on the sovereign’s BBB rating to negative from stable.

Yet while Brazilian spreads were about 10-15bp wider, today’s sell-off failed to reach the intensity of last week’s rout.

“The market is weaker, but it is contained,” said a New York-based trader. “There is no panic like last Monday.”

The 2024s issued by Brazilian oil company Petrobras were being spotted at around 622bp-612bp earlier today, or just 5bp wider.

This comes as oil prices tumbled about 7% on Tuesday on renewed concerns about Chinese growth, with Colombian oil firm Ecopetrol’s 2025 falling about 75ct since Friday to 88.375. (Reporting By Paul Kilby; editing by Shankar Ramakrishnan)

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