Banco Bradesco sells notes; euro zone crisis stalls EM market; China South City sets talk

By Christine Van Dusen

Atlanta, Jan. 6 - Brazil's Banco Bradesco SA sold notes on a weaker Thursday as investors stayed out of the game or sought safer assets on renewed concern about the European debt crisis. Still, the reaction was somewhat muted, given that data due Friday is expected to show strong U.S. jobs growth.

Upon word that the European Union wants senior bondholders to help pay for bailouts in the finance industry, yields fell slightly on Thursday and the JPMorgan Emerging Markets Bond Index Plus spread widened 4 basis points in the morning before finishing the day 5 bps wider.

Venezuela stood out, widening by about 18 bps as the sovereign's fiscal picture inspired some profit-taking.

"Today there has been some mild broad weakness, though it's largely contained. It's mostly 5 to 10 bps wider across most of the sovereigns," a Toronto-based market source said. "EM assets in general are struggling to push and extend the rally from December here. Investors just seem hesitant to add to their EM long positions.

"I think the European uncertainty and the peripheral situation are keeping a lot of people sidelined."

Volumes were a bit off, a New York-based market source said.

"It's a little bit quieter than it's been the last couple of days," he said. "It just seems like trading volumes aren't quite what they were."

Bradesco adds on

The new deal from Banco Bradesco - a $500 million add-on to its 5.9% notes due Jan. 16, 2021 - came to market Thursday at 98.945 to yield 6.042%, or Treasuries plus 262.5 bps, a market source said.

Bank of America Merrill Lynch, Bradesco BBI, HSBC and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal, which was talked at a spread of Treasuries plus 262.5 bps to 275 bps.

The original issue totaled $1 billion and priced in August at 99.622 to yield 5.95%.

This followed Wednesday's pricing by the Republic of Turkey of $1 billion 6% global notes due Jan. 14, 2041 at 96.631 to yield 6¼%, or Treasuries plus 169.7 bps, according to a government filing.

Barclays Capital, Deutsche Bank and JPMorgan were the bookrunners for the Securities and Exchange Commission-registered deal.

Proceeds will be used for general financing purposes, which may include the repayment of debt.

The cost of borrowing was the lowest for 30-year bonds from the sovereign, according to a statement on the Republic of Turkey Prime Ministry Undersecretariat of Treasury website.

The bond was 5 times oversubscribed, with orders from 150 accounts in 21 countries, the statement said. About 65% was allocated to foreign investors - with 33% from Europe, 31% from the United States and 1% from Asia - while 35% went to local investors.

China South talks notes

In other news Thursday, logistics and wholesale shipping holding company China South International Industrial Materials City Co. Ltd. (China South City Holdings) set price guidance for its planned issue of up to $250 million of five-year notes at 14¼%, a market source said.

UBS and BOC International are the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used for general corporate purposes and to fund properties under development and planned for future development.

And Brazilian mall company BR Malls Participacoes SA is planning to issue $200 million perpetual notes, a market source said.

Proceeds will be used for general corporate purposes and to fund capital expenditures and refinance existing debt.

Sources were also talking Thursday about a possible issue of between $300 million and $400 million of notes from Buenos Aires.

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