Emerging market debt firmer amid thin volumes; Davomas adds $25 million to 2011 notes

By Reshmi Basu, Paul Deckelman, and Paul A. Harris

New York, Dec. 14 - Emerging market debt saw a firm yet uneventful session Thursday, while Ecuador halted its winning streak on Wall Street-unfriendly comments made by president-elect Rafael Correa.

In the primary market, the new issue pipeline is grinding to a screeching halt as the year comes to an end. But there was some news on that front.

Davomas International Finance Co. Pte Ltd. a Singapore-based special-purpose vehicle of Indonesian cocoa producer, P.T. Davomas Abadi Tbk, priced a $25 million add-on to its 11% senior unsecured notes due May 9, 2011 (B2/B+) at 99.25, resulting in a yield of 11.213%.

Lehman Brothers ran the books for the Regulation S deal.

Proceeds will be used to purchase a new power generation set and fund working capital requirements.

The original $125 million issue priced at par on April 27, 2006, bringing the total issue size to $150 million following Thursday's add-on.

And adding new details, AES Panama SA set price talk for a $300 million offering of 10-year senior notes (/BBB-/BBB-) at the Treasuries plus 200 basis points area.

Credit Suisse is the bookrunner for the Rule 144A/Regulation S transaction.

Proceeds will be used to repay existing debt, to make dividend payments to shareholders and for general corporate purposes.

AES Panama is a subsidiary of global power company AES Corp.

Ecuador down on Correa comments

Back to the secondary, all was quiet and firmer, with the exception of Ecuador, which saw its credit diced on renewed debt restructuring worries.

Earlier this week, the Andean country began to see support as investors priced in expectations of a more pragmatic approach by president-elect Correa.

In the prior session, a report by Credit Suisse forecast that Correa would ease up on his hard-nosed debt restructuring agenda once in office. Additionally, the firm noted that a debt default in 2007 was unlikely. That bullish outlook helped the country extend a rally that tightened its spread by a whopping 50 basis points as measured by the JP Morgan EMBI index.

But while Credit Suisse was Ecuador's best friend on Wednesday, Correa proved to be investors' worst nightmare Thursday, according to sources.

On a visit to Argentina, Correa repeated his stance that the country would restructure Ecuador's external debt, "far from a pragmatic view," as investors had been hoping, noted a market source.

Uncertainty surrounding the country's debt restructuring plans triggered a sell-off as spreads kicked out by 20 basis points while the Ecuador bond due 2012 gave up 1.50 to 94.50 bid, 96.50 offered. The country's bond due 2030 shed 2 points to 90 bid, 91 offered.

Argentina, Brazil strong

Overall, Thursday's session was described as uneventful amid thinning trading volumes. High beta credits such as Argentina and Brazil continued to rise.

In trading, the Argentinean discount bond due 2033 inched up 0.45 to 106.50 bid, 106.95 offered. The Brazilian bellwether bond due 2040 added 0.15 to 133.10 bid, 133.20 offered.

Meanwhile higher oil prices gave support to Venezuela. During the session, the country's bond due 2027 moved up 0.15 to 126.40 bid, 126.75 offered.

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