EM LATAM CREDIT: Ambipar: Balance Sheet "Inconsistent"? – Negative
(AMBIBZ; NR/D/C)
• Sumitomo Bank, a holder of Ambipar debt, filed a statement in court that attempted to overturn the withdrawal of protection that Ambipar obtained last week, according to an article in local news outlet O Globo. Please see our comment on the protection request last week:
https://mni.marketnews.com/4mF52iQ)
• Ambipar 2033 bonds that were issued at a price of 100 January 2025 were last quoted 17.73, down about 50 points last week. There was a steady slide in the price of bonds up until two weeks ago when it gapped lower as investor concerns about governance and transparency became more pronounced.
• Sumitomo is questioning in their filing why a company that claims to have BRL4.7bn cash on their balance sheet would seek protection under bankruptcy law, stating either they don’t really have the debt to justify the filing or that “the balance sheet is seriously inconsistent”, quoting the petition as reported by O Globo.
• Sumitomo also mentions a derivative transaction with Deutsche Bank in its petition, and it is also mentioned in an article by Valor that discusses who signed the derivatives contract as well as demands for additional collateral that were partly responsible for triggering the request for emergency protection from creditors.
• Our initial read of the article is that the derivative was a hedge against a loan made to Ambipar and it had mark to market clauses which required a payment.
• What started as worries earlier this year about regulator investigations into unusual trading activity surrounding a stock buyback and then a missed filing of the company’s 2024 annual report expanded into concerns about possible transactions with troubled Brazil bank Banco Master in mid-September 2025. Then the CFO resigned last week.
• All along, if you had just looked at the numbers on paper this Brazil based environmental services company looked pretty good, but debt investors consistently seemed to demand a high yield premium for this company. Note that the 2033s were priced to yield 10.875% January 2025 when the senior unsecured bonds were rated ‘BB-‘ at the time. The Ambipar credit ratings were on positive outlook by both rating agencies earlier this year.
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RATINGS: S&P Upgrades Portugal To A+ From A
S&P has upgraded Portugal's long-term credit rating to A+ from A, with a stable outlook (had been positive).
- This is the 7th S&P upgrade for Portugal, from a low of BB in 2012-15. Only four ratings are higher (AA-, AA, AA+, AAA). This is the same rating as Slovakia, and just above Spain (A) per S&P.
- Per Bloomberg: "*S&PGR UPGRADES PORTUGAL TO 'A+' ON LOWER DEBT; OUTLOOK STABLE"
STIR: Still Eyeing September And December Cuts
With few market-moving data points this week, implied Fed rate cuts essentially held onto their post-Jackson Hole upward repricing, adding a couple of basis points of easing for good measure heading into the Labor day weekend.
- Indeed, the lack of movement is somewhat remarkable given this week's extraordinary "firing" of Fed Governor Cook, which is currently being fought out in the courts. In all it probably added to the dovish tone on the near-term rate outlook post-Jackson Hole but not substantially so, at least so far.
- The current path sees a September rate cut priced with nearly 90% implied probability, with 56bp of cuts through end-year (a cumulatively priced second cut in December) and 83bp through March 2026 (3+ cuts).
MACRO ANALYSIS: MNI US Macro Weekly: One Week, Two Labor Days
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- A busy pre-holiday week for data brought mixed economic signals and little net change in Fed easing expectations, putting next week’s labor day – Friday with its nonfarm payrolls report, of course, with apologies to Monday’s federal holiday – in focus for the FOMC and market participants alike.
- Second-quarter GDP was revised up by more than expected in the second reading, to 3.3% Q/Q SAAR, driven by better-than-previously estimated domestic demand but still leaving 1st half growth in slightly weaker territory vs last year. That said, the Atlanta Fed's Q3 GDPNow estimate jumped to 3.47% (though the implied contribution from net exports in the quarter looks somewhat dubious, as we explain).
- The other major release of the week was July's Personal Income and Outlays report, which showed a modest uptick in income and spending on the month. However, the broader trends remain mixed at best, as real disposable income growth remains soft and services consumption is failing to regain traction.
- Core PCE inflation was close to expectations in July as the Y/Y accelerated to 2.9% for its fastest since February as it moves further away from recent lows of 2.6% having stalled above the 2% target. Recent trend rates are a little hotter but the median FOMC member will still need to see a further acceleration to meet their 4Q25 forecasts from June.
- Labor data were mixed. Latest jobless claims were in line to slightly better than expected, with initial claims trending a little higher but still impressively low whilst continuing claims are broadly plateauing after sharper increases in 1H25. But within the Conference Board consumer survey, the labor differential edged lower again, suggesting a continued upward trend in the unemployment rate.
- Elsewhere: regional Fed activity surveys were individually mixed, but combined generally showed an improvement in both manufacturing and services activity albeit with continued upside price pressures.
- Consumer sentiment (UMichigan and Conference Board surveys) and housing activity remained soft.
- Apart from Gov Waller again making the case from rate cuts, other FOMC colleagues who commented this week were a little more guarded when it came to the need for easing, to our ear.
