Guatemala, Korea Development Bank sell notes; IPIC, Dubai tighten; VEB, Pemex deals ahead

By Christine Van Dusen and Aleesia Forni

Atlanta, May 29 - Guatemala and Korea Development Bank priced notes as investors continued to buy some emerging markets bonds but shunned others while ignoring Spain's credit rating downgrade and embracing the speculation that Greece will stay in the euro.

"It's been a morning spent jockeying for position as the euro comedy rolls along," a London-based trader said. "Activity is still relatively subdued, but retail investors are better buyers, which is helping, given the backdrop."

Said another market source, "People are feeling a little better about it, but people still recognize there's still a lot of risk there."

With the risky climate in mind, sources from Barclays Capital continued to urge investors to show caution.

"There has been no clear theme so far today," the bankers said in a report. "We continue to favor a defensive approach to risky assets."

In trading, Moscow-based oil company TNK-BP was five basis points wider after chief executive Mikhail Fridman announced he would resign for personal reasons, which surprised market-watchers.

Elsewhere in Russia, Vimpelcom was "bearing the brunt of the selling," the London trader said. "They're wider by 20 bps as an Algerian court rejected Vimpelcom's appeal on a $1.3 billion fine."

Turkish corporates also received attention on Tuesday, with Yuksel Insaat trading up.

Firmer tone for bonds

Overall, bonds from emerging Europe, the Middle East and Africa opened with a firmer tone, due to the more constructive mood in broader credit markets, a London-based trader said.

"Action is dominated by Middle East and North Africa flow, where we have International Petroleum Investment Co. and Dubai five bps tighter on good volume," he said.

Also from the Middle East, Saudi Electricity Co.'s 2017 bonds were in demand, trading at 100.75 bid, 101.10 offered.

"I've not found the story yet, but somebody loves it," another trader said. "It's outperforming even the flight-to-quality bid for U.S. Treasuries."

From Dubai, oil transportation group Baghlan Group FZCO mandated BNP Paribas for a possible issue of three-year dollar notes, a market source said.

The Regulation S transaction will be marketed during an upcoming roadshow.

Proceeds will be used for capital expenditures and for the acquisition of a 33.33% stake in Bahar Energy Ltd.

Guatemala prices

Guatemala priced a $700 million issue of 5 ¾% notes due June 6, 2022 at 99.065 to yield 5 7/8%, or Treasuries plus 414.5 bps, a market source said.

Deutsche Bank was the bookrunner for the Rule 144A and Regulation S transaction.

Proceeds will be used for debt refinancing and general budgetary needs.

In another new deal, Seoul-based Korea Development Bank priced a two-tranche issue of notes due 2015 and 2017 via bookrunner Daiwa, a market source said.

The deal included 323.9 million Turkish lira of notes due June 18, 2015 that priced at par to yield 8.35%. The second tranche of R$45.5 million 7.02% notes due June 21, 2017 also priced at par.

The lender recently announced plans for a ¥30 billion-minimum issue of two-, three- and five-year notes.

"If you can get to the market quickly, it's one thing," a syndicate source said, adding that top-rated issuers are more likely to bring deals in the current environment.

VEB notes on tap

Russia-based lender Vnesheconombank (VEB) is planning a dollar-denominated issue of benchmark-sized notes due 2022, a market source said.

No other details were immediately available on Tuesday.

VEB last placed $750 million of 5 3/8% notes due 2017 at par to yield Treasuries plus 466.3 bps via BNP Paribas, JPMorgan, Morgan Stanley and RBS in a Rule 144A and Regulation S deal.

"It wants to tap the longer-dated end of the curve," a London-based analyst said.

In response, "banks are heavy," she said.

Pemex roadshow

Mexico-based petrochemical company Petroleos Mexicanos SAB de CV (Pemex) has mandated HSBC to lead a roadshow this week in Europe, a market source said.

An issue of euro-denominated notes could follow.

Euro deals from Latin American issuers often aren't very large, another market source said. "The deals tend to be small, so I wouldn't say it's a big change or anything," she said. "Names like Pemex, they historically have been able to do deals there. They're not big deals, but issuers like that like to sort of diversify a little."

Brasil Foods dollar notes

Also from Latin America, food processing and beverage company BRF Brasil Foods SA set the tenor at 10 years for a planned issue of dollar notes, a market source said.

BB Securities, HSBC, Itau BBA and Santander are the bookrunners for the Rule 144A and Regulation S deal.

A roadshow ended Tuesday.

In trading from Latin America, things were "a little bit better" on Tuesday, though one market source reported there was not "a lot of flow going on one way or the other."

"It's not like investors are suddenly turning around and feeling like they're short, and they've got to buy," the source added.

Honkong Land oversubscribed

The final book for property investment and management company Hongkong Land Co.'s recent $500 million issue of 4½% 10-year bonds was $1.7 billion with more than 140 orders, a market source said.

The notes priced at Treasuries plus 290 bps, or 98.796, to yield 4 5/8%. Mitsubishi, Standard Chartered Bank and HSBC were the bookrunners for the Regulation S deal.

About 85% of the orders came from Asia and 15% from Europe. Funds and asset managers accounted for 42%, banks 26%, insurers and pensions 24% and private banks and corporates 8%.

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