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Closer To The Edge

12 May 2016 by lberuti

The 5 year risk premium of PORTEL (Portugal Telecom) was marked aggressively wider during the afternoon session. It traded at 77 points (to insure $1 worth of debt over 5 years, one has to pay 77cts upfront plus 1.25cts on a quarterly basis), up 3.75 points compared with yesterday. That was not triggered by Brazil’s senate’s vote to suspend Dilma Rousseff from office, after months of political turmoil in the recession-wracked country. Than was not triggered by the wider-than-expected loss which Oi SA, PORTEL’s parent company, reported for the first quarter of 2016. That followed the news that, because the company has paid back some loans at par, there is now less cash available. Their cash balance stood at BRL8.5bln (roughly $2.5bln) compared with approximately BRL15bln at the end of December. Get ready for a credit event anytime soon.