Colombia’s state-directed oil and gas giant Ecopetrol is selling billions in debt on the international market in a major fund-raising effort.
Ecopetrol is selling $2.5 billion in bonds that will come due in 5, 10 and 30 years.
The company is trying to raise cash in currencies other than the peso in order to meet investment goals after the Ministry of Finance gave Ecopetrol approval to go ahead on the bond sale earlier this month.
The sale of Ecopetrol’s debt is likely to beat out returns on US Treasury notes, making the company’s debt prey for global investors, who have scoured emerging markets for greater yields on their money as the global financial landscape shifts wildly beneath their feet.
A Hong Kong-based hedge fund analyst told Colombia Reports that the offer was a “welcome diversification” from other emerging market opportunities.
“Ecopetrol issued three different bonds, we participated in all – a 5yr, 10yr, and a 30yr. Although our demand was greater, we were allocated about US$10mm of the deal as it was significantly oversubscribed,” said the analyst.
LatAm investors’ worries have spread in the wake of a disappointing year for Brazil, Mexico’s surprising downside revision of GDP growth, and in response to a likely curbing of the US Fed stimulus, which has encouraged a flood of investor money in emerging markets.
But Ecopetrol seems to remain in good standing as uncertainty rattles emerging markets. Right now Ecopetrol possesses investment grade ratings from Moody’s, Fitch, and Standard & Poor’s rating agencies.
“Ecopetrol’s credit profile speaks for itself,” said the analyst. “Negligible debt levels and margins of 50% for its business…. The company priced its bonds at a very attractive level for investors… despite being government-owned.”
Ecopetrol has partnered with Mexico’s state-directed oil company Pemex for the bond sale, which is formally set to close on September 18th, says Ecopetrol. The Emission, says the company, is currently 4.8 times oversubscribed.
According to a Bloomberg report, Bank of America and Morgan Stanley are in charge of Ecopetrol’s deal.
Sources
Ecopetrol press release (Ecopetrol)
Interview with Hong Kong-based hedge fund analyst
Bloomberg – http://mobile.bloomberg.com/news/2013-09-10/ecopetrol-said-to-join-pemex-selling-bonds-as-issuance-jumps-1-.html
