EM CREDIT SUPPLY: Medco Energi (MEDCIJ, B1/BB-/BB-) - new $ deal FV Estimate
"*IPT: MEDCO ENERGI INTERNASIONAL $BENCHMARK 5NC2 FXD, 9.125%" - BBG
New Issue: $Benchmark 5NC2
Tender: $ 26 and $ 27
IPT: 9.125%
FV: T+464bp area (c. 8.45%)
• Indonesian oil & gas company, PT Medco Energi Internasional, has mandated banks for a new $benchmark deal from wholly owned subsidiary Medco Cypress Tree. The new notes will be unconditionally and irrevocably guaranteed by the parent. Medco is also in the market tendering its $ '26 and $ '27 bonds.
• Medco is predominantly an oil & gas company (91% of revenues) with around 50% of EBITDA derived from fixed-priced gas contracts, which it also guides for 2025. Overall leverage related to the restricted group, the oil & gas businesses only, was 1.8x at end 2024 versus 2.2x in 2023. For 2025 the company guides leverage below 2.5x assuming oil at $65/boe.
• In terms of a fair value estimate, we focus mainly on the existing Medco curve, as well as other HY Indonesian issuers. We see fair value at z+495bp (T+464bp, 8.45%) around 10bp wide to the more seasoned $500m Medco 4/29s.
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AUSSIE BONDS: Cheaper But At Bests, Tracking US Tsys, CC Down, BC Unch
ACGBs (YM -12.0 & XM -16.5) are significantly cheaper but at session highs after today’s domestic confidence data.
- Westpac’s measure of consumer confidence sank 6% m/m in April to 90.1 down from 95.9 in March, which had been boosted by February’s rate cut. Both current conditions and expectations were lower.
- NAB’s March business survey was little changed from February with confidence down 1 point to -3 and conditions up 1 point to +4. The result is in line with moderate growth. The survey results don’t suggest any worry about a global trade war before US reciprocal tariffs were announced, which were higher than expected.
- However, the key driver of today’s intra-session move is likely to be US tsys. Cash US tsys are showing a bull-steepener, with benchmark yields flat to 3bps lower, in today's Asia-Pac session after yesterday’s extremely heavy session.
- Cash ACGBs are 11-16bps cheaper with the AU-US 10-year yield differential at +10bps.
- Swap rates are 8-13bps higher, with the 3s10s curve steeper.
- The bills strip has cheapened dramatically, with pricing -5 to -12.
- RBA-dated OIS pricing is 4-14bps firmer across meetings today. A 50bp rate cut in May is given a 44% probability, with a cumulative 110bps of easing priced by year-end.
AUSTRALIA DATA: NAB Business Survey Little Changed Ahead Of US Tariffs
NAB’s March business survey was little changed from February with confidence down 1 point to -3 and conditions up 1 point to +4. The result is in line with moderate growth but doesn’t signal any pickup in the pace of the recovery, likely given heightened uncertainty. The survey results don’t suggest any worry about a global trade war before US reciprocal tariffs were announced, which were higher than expected.
- On the inflation side, labour costs remained elevated at 1.5% 3m/3m after 1.6% and purchase costs were steady at 1.4%. However, the rise in final product prices held at a subdued 0.4%
- The pickup in conditions was driven by a 2 point increase in profitability to +1, while employment was steady at +4 and trading fell 1 point to +6. Capex rose 1 point to +7.
- Forward looking orders rose 1 point to -2, while stocks increased 2 points to +5, which may be indicating preparation for stronger demand as capacity utilisation rose almost 1pp to 82.9%.
- On the external front, exports were flat at 0 and sales rose 1 point to +1.
AUSSIE BONDS: ACGB Jun-34 (Green) Auction Result
The AOFM sells A$400mn of the 4.25% 21 June 2034 Green Bond:
- Average Yield (%): 4.1725 (prev. 4.4693)
- High Yield (%): 4.1750 (prev. 4.4725)
- Bid/Cover: 4.8875x (prev. 5.1833x)
- Allotted at Highest Accepted Yld as % of Bid at that Yld (%): 51 (prev. 39.5)
- Bidders: 41 (prev. 38), 13 (prev. 12) successful, 6 (prev. 6) allocated in full
