Americas

Chinese electric car company Nio made a splash in the US convertible bond market this week, raising $650m from its debut issuance and using a call spread feature to engineer a tasty premium. Jonathan Breen reports.

Following confusion over the effect US sanctions against Venezuelan state oil company PDVSA could have on US bondholders, the final picture is growing clearer and the unfurling scene is not a pretty one.

Despite some investors saying it had been clear for some time that Pemex was on a gradual decline towards junk status, a two notch rating downgrade from Fitch appeared to catch bondholders unaware as the Mexican state oil giant’s debt slumped in secondary markets.

A fresh round of US sanctions on Venezuela’s government can only squeeze President Maduro further, said bond investors, but meanwhile there was some confusion on Tuesday regarding the apparent ban on secondary market trading of PDVSA debt by US persons.

Investors have come out in huge numbers to buy the three corporate hybrid deals that have been sold so far in 2019. However, the excess demand is unlikely to be sated as the year unfolds.

A fresh round of US sanctions on Venezuela’s government will add to the pressure on 46th president of Venezuela Nicolas Maduro to clear off, said bond investors.

Stéphane Morin will step up from his current job as global head of compliance at Natixis in order to become deputy CEO for the Americas corporate and investment banking division. And he will report to Olivier Delay, announced as the new CEO of that department earlier this year.

S&P Global Ratings, which this week became the first international rating agency permitted to rate Chinese domestic deals, plans to start its business gradually. The firm will initially concentrate on renminbi deals sold by its existing clients.

Nio, the Chinese electric car company, has launched bookbuilding for a convertible bond that will be worth as much as $650m, according to a source close to the deal.

Brazilian pulp and paper producer Suzano returned to bond markets for the third time in five months on Tuesday, tapping its 2029s for a further $750m.

The US sanctions slapped on Petroleos de Venezuela (PDVSA) this week look similar to those that have just been removed from Russia’s EN+ and Rusal. The move indicates that the US believes in the effectiveness of sanctions and is happy to keep deploying them. Emerging markets investors should beware.

Liquidity-constrained South American sovereign Ecuador was quick to take its chance to raise much-needed funds on Monday after a strong rally in its bonds, but the deal had investors and analysts worrying an IMF deal is further away than thought.