Korea Housing Finance prints notes on weaker day for EM; Eurasian Bank, Severstal delay

By Christine Van Dusen

Atlanta, July 18 - Following Friday's less-than-encouraging results from Europe's banking stress tests, emerging markets debt had a weaker session on Monday, with wider spreads, lighter volumes and a lone reported new issue from Korea Housing Finance Corp.

"Ongoing concerns about the European funding crisis and worries over the U.S. debt ceiling continue to hang over financial markets," according to a report from RBC Capital Markets.

The JPMorgan Emerging Markets Bond Index Plus spread started the day 3 basis points wider at Treasuries plus 289 bps before finishing the session at Treasuries plus 284 bps.

"The benign (stress test) results are not helping spreads," a London-based trader said. "It's a very sleepy open, though, with just activity in benchmarks and new issues. Small volumes are going through."

Against this backdrop, a few issuers did manage to take steps toward the market, including Venezuela, Russia's Credit Bank of Moscow OJSC, the Province of Buenos Aires and Brazil's Usina Vista Alegre.

Meanwhile, Kazakhstan-based Eurasian Bank JSC and Russia's OAO Severstal delayed their plans for notes.

KHFC sells bonds

In its new deal, Seoul-based Korea Housing Finance priced $500 million 3½% notes due Dec. 15, 2016 at 99.43 to yield 3.618%, or Treasuries plus 218 bps, a market source said.

The notes priced at the lower end of guidance, which was set at Treasuries plus 220 bps, plus or minus 2 bps.

BNP Paribas, Nomura and Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S notes.

This news followed the Friday pricing of Barbados-based Caribbean Development Bank's $175 million floating-rate notes due July 18, 2013 at par to yield Libor plus 30 bps, a market source said.

BNP Paribas was the bookrunner for the Rule 144A and Regulation S notes, which were initially expected to total $200 million.

Moscow lender taps bookrunner

In other deal-related news, Russia-based Credit Bank of Moscow has mandated Raiffeisen Bank International to arrange a roadshow in Europe starting July 20, a market source said.

A dollar-denominated issue of Regulation S notes is expected to follow.

Kazakhstan-based lender Eurasian Bank is delaying plans for a global bond issue, a market source said.

The company may proceed with a bond of up to $300 million in the fourth quarter.

And Russia-based steel and mining company Severstal has postponed its planned issue of up to $500 million of notes, a market source said.

Goldman Sachs and Barclays Capital were the bookrunners for the deal, which was marketed on a roadshow from July 8 to July 11.

Market sources were also whispering about a possible delay for Abu Dhabi-based Tourism Development & Investment Co.'s planned $1 billion notes via RBS, HSBC and Standard Chartered.

Venezuela issuance ahead

From Latin America, Venezuela is mulling an issue of notes that could total as much as $3 billion, a market source said.

The notes could come to the market as soon as the first week of August.

"It might be one of those deals where they do a five- and 30-year at $1.5 billion each, but it's definitely coming to help fund the local FX market," a Connecticut-based trader said. "We're seeing buyers on weakness there. It's really because of the speculation that there may be a regime change in the next 12 to 18 months with president [Hugo] Chavez sick. He may be too ill to run for reelection.

"A lot of accounts in our market that may have been underweight on Venezuela are going back to market weight as they wait for updates on Chavez, despite talk of supply."

LatAm in focus

Buenos Aires plans to issue a $200 million add-on to its existing 11¾% notes due Oct. 5, 2015, a market source said.

Bank of America Merrill Lynch and Deutsche Bank are the bookrunners for the Rule 144A and Regulation S notes.

And Brazil-based sugarcane grower and sugar and ethanol producer Usina Vista Alegre has mandated BTG Pactual for a dollar-denominated issue of seven-year notes, a market source said.

A roadshow for the Rule 144A and Regulation S notes began July 15 and ends July 21.

The notes will be non-callable for four years.

Metalloinvest trades up

In trading, the recent issue of notes from Russia-based mining and metallurgy company Metalloinvest Finance Ltd. was seen at 100.10 bid, 100.45 offered on Monday after pricing on Thursday at par.

Bank of America Merrill Lynch, BNP Paribas, Credit Suisse, ING, JPMorgan, RBS, Societe Generale, Troika Dialog and VTB Capital were the bookrunners for the $750 million issue of 6½% notes due 2016.

The notes printed at the tight end of the 6½% to 6 5/8% price talk.

"All metals and mining are a touch weaker, but no great volumes," a trader said.

Said the Connecticut-based trader: "That deal was relatively active, originally well bid, and then we started to see some selling as the overall market soured. That's still done OK. In general it's light volumes and received OK but nothing to write home about."

Prices down a touch

In general, most prices were down about a quarter-point and the secondary market was mainly quiet on Monday, the Connecticut trader said.

"A lot of the buyside portfolio managers are really sitting tight, not doing much of anything. A lot are not in the office, whether it's the summer holiday or the fact that there's very little opportunity out there at the moment," he said.

"For the most part the dealers and buyside accounts have really taken everything in stride thus far and have really reacted very, very quietly with very light activity. Perhaps they're being steered more toward the currency side, where there's been interesting things going on."

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