Bondholders Look Past Venezuela Woes to Regain Trust in Masisa

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Chilean wood-panel maker Masisa SA is persuading bond investors to look past the turmoil roiling its Venezuela business.

Masisa’s $300 million of notes due 2019 have gained 4.2 percent since May 15, when the company said first-quarter profit excluding Venezuelan operations rose 5.4 percent, and that it had cut debt to a four-year low. Similar junk-rated emerging-market bonds slumped an average of 1.1 percent in the same span.

With Venezuelan revenue trapped because of the country’s shortage of hard currency, Masisa is relying on rising exports to the U.S. to shore up its finances. Venezuela’s faltering economy pushed the company’s bonds to a record low in December. Masisa gets 35 percent of total revenue from the country, where its forestry land -- measuring 569 square miles (3,240 square kilometers) -- is bigger than New York City.

“With the first-quarter results, they made some progress towards sustainability,” Cornel Bruhin, a money manager at MainFirst Schweiz AG, said by telephone from Zurich. “They have a long way to go, but they’re working on it. They’re on the right path, and some investors are changing their minds.”

Eugenio Arteaga, chief financial and administrative officer at Masisa, said $41 million of cost cuts also helped bolster profits.

‘Moving Ahead’

“The first quarter proved that we’re moving ahead as planned, and we expect this trend to continue during the rest of the year,” he said by telephone from Santiago.

Masisa, whose wood panels are used to make furniture, said sales to the U.S. rose 71 percent in the first quarter from a year ago. Arteaga said the Santiago-based company’s profit before items will increase by another $30 million per year once a new plant in northern Mexico is operational in 2016.

Still, Standard & Poor’s cut the outlook on Masisa’s rating to negative last month, citing the risk of “weaker liquidity.” It rates Masisa BB-, three levels below investment grade.

Yields on Masisa’s bonds have dropped 0.93 percentage point since the May 15 earnings report to a six-month low of 10.06 percent, data compiled by Bloomberg show. The company sold the notes in May 2014 to yield 9.5 percent.

The drop in yields is a sign that institutional investors are regaining confidence after the results, according to Jaime Achondo, head trader at Fynsa International.

“We like Masisa as a risk option to raise the yield of our portfolio,” Achondo said by telephone from Santiago.