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Venezuela companies may sell bonds maturing in over five years
Bloomberg
CARACAS
Petroleumworld.com 05 11 06
Venezuelan companies plan to sell bolivar-denominated bonds with maturities longer than five years for the first time, to take advantage of rising investor confidence in the country's currency, the securities regulator said.The National Securities Commission is studying requests by companies such as CA Electricidad de Caracas and cable television provider InterCable CA to sell debt with maturities ranging between five and 10 years on the Caracas Stock Exchange, commission President Fernando de Candia said in an April 26 interview. The longest Venezuelan security sold to date was an issue of five-year asset-backed notes last year by Venezuela Oil Shipping Co.
Investor demand for longer-term debt is rising as a surge in oil exports allows the government to maintain the value of the currency. That's a break from the past two years when the government devalued the bolivar a combined 26 percent. Companies, kept out of the market until now by lack of demand, want to take advantage of the stable bolivar and low interest rates to fund expansion, said analyst Socrates Longa of Merinvest.
``Interest rates are at low levels historically and companies are trying to lock in low rates,'' Longa, head of research at the Caracas based brokerage, said in a telephone interview.
Today's demand stems in part from restrictions on dollar purchases that the government imposed in 2003 to halt a decline in international reserves, leaving domestic investors with few options for their funds. Money supply, as measured by the M1 aggregate, has more than quadrupled since the government implemented the restrictions.
Yields on government 91-day domestic debt have fallen to 7.30 percent yesterday from 43.96 percent as of Jan. 28, 2003. The government's 182-day note yesterday yielded 7.61 percent. Yields on comparable corporate securities are about 300 basis points higher.
Longer Maturities
``There's a lot of money in the market,'' said Cesar Paoli, a bond trader with brokerage Activalores in Caracas. ``There is interest in debt with longer maturities.''
In addition to Electricidad de Caracas and InterCable, the multilateral lender Andean Development Corp. is among those that have expressed interest in local bond sales, Candia said.
``We're studying proposals,'' he said. ``Companies are sending us their prospectuses and we are reviewing the numbers.''
Andean Development Corp. spokeswoman Nathalie Gerbasi confirmed the lender is considering a sale and declined to comment further. Electricidad de Caracas President Julian Nebreda said in August that the company was planning to sell seven-year bonds this year. Calls to the companies seeking comment weren't returned.
Exchange Trading
Increased demand for fixed-income instruments may help push volume on the Caracas Stock Exchange up 40 percent this year, building on last year's gain of 38 percent, Candia said. Fixed income securities now account for 16 percent of the volume after the exchange added debt securities in 2002 to boost trading.
The exchange's index is the world's fourth-best performer this year, up 52 percent. Still, stock volumes remain light, Candia said. This year, daily volume excluding bonds and American depositary receipts had totaled 6.1 billion bolivars, or $2.8 million.
``I think demand is there for five years, or so,'' said Miguel Octavio, executive director of brokerage BBO Servicios in Caracas. ``But longer than five years, I think some investors will be more hesitant.''
Volumes on the exchange could also soar if the government allows trading of the government's domestic debt, Candia said. The proposal to create a secondary market has been under study for more than five years.
``The Finance Ministry is doing the studies,'' he said. ``They haven't given the date only the expectation.''
He declined to elaborate.
Venezuela's domestic debt climbed to $15.6 billion as of Dec. 31 from $15.4 billion in 2004 and $5.9 billion in 1999, the year Chavez took office.
To contact the reporter on this story:
Peter Wilson in Caracas at pewilson@bloomberg.net.
Bloomberg 10 14 08
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