EM LATAM CREDIT: Hidrovias (HIDRVS; B1neg/NR/BB-neg): Capital Raise
“Ultra to refocus on growing Hidrovias do Brasil” – Valor International
Neutral for spreads
• Brazil water transport company Hidrovias successfully raised nearly BRL1.2bn in equity.
• Ultrapar, a Brazil gas and chemicals distribution and transport services provider already subscribed in advance for BRL500mn and owns 40% of the company.
• We think Fitch may remove its negative watch and affirm its ‘BB-‘ ratings after a capital raise at the top end of the target range which will help the company reduce balance sheet leverage.
• Net debt grew 17% 2024 YoY, mostly because of the BRL depreciation on USD denominated debt with net debt/EBITDA growing to 6.6x vs 4.2x the previous year.
• Hidrovias attempted a capital increase in 4Q 2024 and failed, which we discussed previously:
https://mni.marketnews.com/4jbvHCN
• HIDRVS 2031s closed 2024 at T+369bps, widened out to T+437bps amid heightened global market volatility and last quoted T+346bps. The good news seems priced in.
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US TSYS/SUPPLY: Preview 20Y Bond Auction Re-Open
Tsy futures are trading mildly higher in 2s-10s ahead of the $13B 20Y bond auction re-open (912810UJ5) at 1300ET, WI is currently at 4.646%, 18.4bp rich to last month's tail. Today's results will be available shortly after the competitive auctions closes at 1300ET.
- February auction recap: The $16B 20Y Bond new issue auction was slightly weak, with a 1bp tail on a 4.830% high yield vs 4.820% when-issued yield.
- Peripheral stats were on the soft side: bid-cover of 2.43x was the lowest in 4 auctions (2.54x 5-auction average), with primary dealers taking down 17.5% of competitives (16.8% 5-auction average). Directs took 19.5% (16.4% 5-auction average) with indirects taking 63.0% (66.8% 5-auction average).
- From another perspective, it was much weaker result than January's unusually strong auction, and the 5th tail in the last 6 auctions.
- Treasury futures edged very slightly lower on the result, with front TYs down 0.5 ticks at 108-24.5.
