Russia's VTB sells $1.25 billion tight to lowered talk; long-dated LatAm paper outperforms

By Paul A. Harris

St. Louis, Feb. 25 - The Russian Federation's JSC VTB Capital priced a $1.25 billion note issue on Thursday.

VTB's issue crossed the finish line bigger than was expected and with a structure that differed from what had been anticipated heading into the New York open, sources said.

In the secondary market, Latin American debt traded pretty much sideways during the New York session, according to a syndicate banker.

The 10-year part of the maturity curve was flat to lower. However the longer end of the maturity curve did OK, the official said.

Brazil's dollar-denominated 11% bond due 2040 finished at 93.10 bid, 93.85 offered in New York, up ¾ point.

Colombia's dollar-denominated 6 1/8% global bonds due 2041 were at 93.40 bid, 93.90 offered, up 1½ points.

Mexico's 6.05% global bonds due 2040 were 96 bid, 98 offered, also up 1½ points.

Earlier, during the European afternoon, Russia's five-year credit-default swaps were 184 basis points mid, 1 bp tighter.

Meanwhile Ukraine's five-year CDS were 941 bps mid, 10 bps wider.

VTB tight to revised talk

Russia's VTB Capital priced a $1.25 billion issue of 6.465% five-year loan participation notes (Baa1/BBB/BBB) at a 385 bps spread to mid-swaps on Thursday.

The spread came on top of price talk that had tightened during marketing from the 400 bps area.

Deutsche Bank AG, JPMorgan and VTB Capital were the underwriters.

Word out of Europe held that VTB initially intended to price the deal in two tranches, with a 10-year piece that was being whispered at mid-swaps plus 420 bps, 20 bps behind the initial guidance on the five-year notes.

Although no explanation was forthcoming as to why the 10-year tranche ultimately did not materialize, a sellside source, not involved in the transaction, said that it appeared to have gone well.

The company was originally believed to be in the market to raise $1 billion, the source said, adding that the five-year piece ultimately priced on top of downwardly revised price talk, another metric indicative of a strong execution.

Alliance Oil pulls benchmark

Elsewhere, Moscow-based Alliance Oil Co. Ltd. (/B+/B) withdrew its benchmark-sized Rule 144A and Regulation S offering of dollar-denominated five-year global bonds due to market conditions, a buyside source told Prospect News on Thursday.

BNP Paribas, Credit Suisse and JPMorgan were leading the deal.

U.S.-based sources chalked up the deal's demise to its single-B credit rating, coupled with the negative sentiment that pervaded Europe on Thursday, with all of the major European stock indexes posting substantial losses.

A U.S.-based syndicate source took note of the pulled deal in light of an expected pipeline of lower-rated Latin American corporates.

"Right now is not a great time to issue," the syndicate banker said, adding that in addition to volatility in the capital markets, corporate issuers are generally sidelined awaiting fresh financial numbers.

For many, such numbers are a week away, the official said.

With respect to sovereign issuers, they would be ill-advised to bring a deal into volatile capital markets.

"It could cost them a new issue premium of 25 to 50 bps," the syndicate official remarked.

However, while the primary market is quiet at present, March will likely be a different story, the source added.

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