Everscale Partner
IDEA #1: Braskem
Among recently placed papers, let’s pay attention to the dollar issue of Braskem, the largest petrochemical company in Latin America. A 10-year issue of $ 900 million was placed on November 25 this year with a rather high coupon of 7.45% per annum. Since the placement, the price of paper has risen to 106.5%, however, its yield (6.5%) still looks very interesting in the context of international securities of similar credit quality.
Braskem is a leading manufacturer of thermoplastic resins in the Western Hemisphere. With 36 industrial enterprises located in Brazil, the USA, Mexico and Germany, the company produces more than 16 million tons of thermoplastic resins and other petrochemical products per year. Braskem is a leading global manufacturer of biopolymers with its 200,000 ton capacity plant that produces sugar cane based ethanol. The company’s shares are traded on the Brazilian stock exchange with a current market capitalization of $ 5.7 billion. 8 thousand people are employed in Braskem branches around the world.
The company shows a slowdown in financial performance in 2019, which has led to a deterioration in its credit metrics. The probability of default of the issuer after 5 years, calculated according to the default risk model of the Bloomberg agency, is now 3.2%.
The Eurobond is fairly liquid and is serviced by NSD. The issue market is Eurodollar. S&P and Fitch agencies rate the issue at BB- and BB respectively.
The paper provides 4 call options, the yield to the nearest of them (11/15/2024 at a price of 103.725%) is 6.5%. Options to review the coupon level are not provided. Please note that the minimum lot on paper is 200 thousand dollars.
IDEA #2: Gazprom
Paradoxically, certain reserves in terms of price growth of domestic Eurobonds are created as a result of sanctions. So, due to the restrictions imposed by the US authorities on the purchase of a new Russian non-ruble public debt, the RF Ministry of Finance will probably not enter the foreign market with new placements in 2020, while it will have to pay off securities worth $ 3.5 billion and 750 million euros. The lack of a new offer will support traded issues in the secondary market.
Due to litigation with Naftogaz Ukrainy, the prospects for entering the external primary market in the coming months for Gazprom also look somewhat vague. Although the profitability of its farthest (and most highly profitable) issues fell to the 4% mark, their current yield looks very interesting both in terms of absolute values (for example, an issue maturing in 2034 now offers a current yield of 5, 8%), and in the context of Russian analogues. In addition, we note that we do not expect a key dollar rate increase in 2020.
