Bonds of Pacific Rubiales Energy Corp. climbed to their highest level this year after the Colombian oil producer agreed to a takeover by investors including Mexico’s Alfa SAB, whose credit rating is three levels higher.
Pacific Rubiales’s bonds due in 2019 rose 2.46 cents to 94.28 cents on the dollar at 12:33 p.m. in New York, their highest since Dec. 2. The yield fell 0.81 percentage point to 7.18 percent.
Latin America’s largest non-state oil producer said Wednesday that it agreed to a joint offer from Alfa and Harbour Energy Ltd. worth C$2.1 billion ($1.7 billion) for all of its shares. The past year’s plunge in oil prices had pushed the notes to distressed levels, with yields rising to a record 20.46 percent in January.
“You have an investment-grade company looking to buy Pacific Rubiales, which is typically good for bondholders,” Bevan Rosenbloom, an emerging-markets debt strategist at Mitsubishi UFJ Securities USA Inc., said by phone from New York.
Alfa has a BBB credit rating from Standard and Poor’s, compared with BB for Bogota-based Pacific Rubiales.
The deal is subject to approval by Pacific Rubiales shareholders, and Alfa and Harbour are each entitled to a $50 million breakup fee if Pacific Rubiales opts for a higher offer.
The takeover also is contingent on bondholders’ willingness to agree that the deal won’t constitute a “change of control,” according to a press release from Pacific Rubiales. Such a determination would require Pacific Rubiales to buy back the bonds at 101 percent of principal plus interest.
In exchange, bondholders will be able to swap their 2019 bonds, which carry a 5.375 percent coupon, for notes due in 2021 that pay 7.25 percent.