Vale SA (ADR) Helped In Bond Markets By Chinese Deals


Vale SA’s (ADR) (NYSE:VALE) recent deals in China have panned out well for the company’s bond holders, as its long-term debt instruments offer attractive yields.

Last month, Vale announced it had reached a deal with Chinese firms to sell four of its iron ore ships for $445 million. The Brazilian mining company also signed a $4 billion loan deal with the Industrial & Commercial Bank of China Ltd.

The deal has been welcomed by Vale’s debt holders. Yield on the company’s $2.25 billion long-term notes, set to mature in 2022, is currently 1.50 percentage points higher than that on the notes of its peer, Rio Tinto Plc (ADR) (NYSE:RIO), Bloomberg has reported.

“Vale is paying a nice yield,” Danilo Onorino of Dogma Capital SA told Bloomberg. The yield on the company’s bond is “correlated to the potential turnaround of China,” Mr. Onorino further noted. “So you have the angle of the yield, angle of the potential growth of the company and the compression of the spreads,” Mr. Onorino said, while revealing that he made an investment in the company’s debt instruments last month.

The deals were signed after Vale has had a challenging year, with the company’s stock falling 20.90% year-to-date. Last month, Moody’s Investor Service maintained Vale’s Baa2 rating but slashed its outlook from Stable to Negative, as the iron-ore industry faces a downturn following weak Chinese demand.