Emerging markets firm as Dubai hit softened; Agrokor prices; Sigma Alimentos, Cemex plan deals

By Christine Van Dusen and Paul A. Harris

Atlanta, Dec. 1 - Emerging markets improved Tuesday as action picked up in the primary and investors gave a small sigh of relief that Dubai's development arm would restructure only half as much debt as initially expected, market sources said.

"We are in a very different place than we were yesterday," a New York-based investment banking source said.

"We're definitely not out of the woods yet but there is money to be spent. Investors have cash on the sidelines and they want to spend it. They just want to see a couple of stable days here."

Dubai World's announcement that it would freeze about $26 billion of its debt instead of the full $59 billion helped calm fears that the country's financial problems could trigger a new episode in the global credit crisis.

The reduction is "not positive news, but it's less negative," the source said. "You don't want to call it limited or regional because it's not, but the news isn't as bad as expected."

Whereas on Friday and Monday investors feared the fallout would be tremendous, they now see that "it's going to be somewhat contained, regardless of the outcome," a New York trader said. "That is an encouraging sign."

Also encouraging was the pickup in primary action on Tuesday, with the pricing of Croatia-based consumer food product company Agrokor DD's €400 million 10% senior notes due 2016 to yield 10 5/8%, and roadshow plans from two Mexico-based issuers.

Sigma Alimentos SA de CV, a Nuevo Leon-based producer and manufacturer of refrigerated and frozen foods, will market its $250 million 10-year senior notes from Dec. 2 to Dec. 7. And Monterrey-based building materials company Cemex SAB de CV will hit the road for its planned benchmark-sized offering of seven-year senior secured notes from Dec. 3 to Dec. 8, according to market sources.

"When Sigma and Cemex get out on the road we'll see what the investor receptivity is, and see where we truly stand," the trader said. "Just seeing some announced supply feels good."

Cash flows into emerging markets bond funds also improved as investors attempted to sidestep dollar weakness. The average weekly inflow rose to $615 million, according to data service EPFR Global.

It wouldn't be surprising "if emerging markets and sovereign debt funds attract more money before the year is out," said Cameron Brandt, EPFR global senior analyst.

But while emerging markets are expected to improve through the rest of this week and into the next, the uptick may be interrupted by the approaching holidays.

"We have that window and then things will get very quiet," the investment banking source said.

Generally, "things are feeling better," the trader said, "but I continue to believe there will be some investor fatigue heading into year-end."

Agrokor prices €400 million

Agrokor DD priced €400 million of 10% senior notes due 2016 (B2/B/) at 96.968 to yield 10 5/8%, according to a market source.

Price talk was set at the 10½% area for the Rule 144A and Regulation S deal, brought to market by bookrunners BNP Paribas and UniCredit.

The notes are non-callable for four years.

Proceeds will be used to repay debt.

Agrokor is a Zagreb, Croatia-based consumer food product company.

Sigma Alimentos roadshows $250 million

Meanwhile, Mexico's Sigma Alimentos SA de CV announced plans to roadshow a $250 million offering of 10-year senior notes (expected /BBB-/BBB-) beginning Dec. 2 in Los Angeles, according to a market source. The trip will continue on Dec. 3 in New York, Dec. 4 in Boston and Dec. 7 in London, according to a market source.

Deutsche Bank and Santander are the bookrunners for the Rule 144A and Regulation S issue.

Proceeds will be used primarily for refinancing of existing indebtedness.

Sigma Alimentos is a producer and distributor of refrigerated and frozen food products based in Nuevo Leon, Mexico.

Cemex roadshowing benchmark

Also roadshowing soon: Mexico's Cemex with a deal to be sold via subsidiary Cemex Finance.

The Monterrey-based building materials company will market a planned benchmark-sized offering of seven-year senior secured notes (B/B+) beginning Dec 3, according to a New York-based market source.

The bookrunners for the Rule 144A and Regulation S deal are Bank of America Merrill Lynch, Citibank and JP Morgan.

The notes are non-callable for four years.

The two-team roadshow will start in London and Los Angeles, then continue in London and San Francisco on Dec. 4, then New York and Philadelphia/Baltimore on Dec. 7, then finish up on Dec. 8 in Boston and New York.

Nakheel bonds bounce back

For a second straight session, a trader said that Dubai's Nakheel Development was a "big trader of the day, still" - but unlike the past two sessions, which have seen the bonds of the Dubai World property unit in retreat on investor angst about Dubai World's ability to handle its debts, on Tuesday, the bonds were unchanged to higher, apparently given a boost by the news that Dubai World plans to restructure some $26 billion of its $59 billion of outstanding debt. The plan will cover the debt of Dubai World's main property subsidiaries, Nakheel and Limitless.

Announcement of the restructuring plan late Monday helped calm investors rattled by last week's initial announcement by the Dubai government that Dubai World would ask creditors to agree to a standstill on billions of dollars of debt owed - including $3.52 billion of Nakheel bonds slated to come due in about two weeks - as well as by the assertion earlier Monday by a government official that the Dubai government disclaimed responsibility for Dubai World's debts, crushing assumptions by creditors that the emirate would guarantee its liabilities.

With the news picture looking a little brighter, the trader saw Nakheel's 3.172% euro-denominated notes slated to come due on Dec. 14 going out at 58-60, unchanged from Monday's close, but well up from the 52 bid level at which they began the session. Those bonds - which had traded as high as 110 bid last week before Wednesday's Dubai government announcement of a delay in debt payments - had fallen to the 80s at the end of last week and plunged further, to a low of 55, on Monday.

He also saw the 2¾% euro-denominated notes due 2011 trading in a 45-47 range, which he called up about 5 points from Monday's lows around 421/2; those bonds too had plunged badly on news of Dubai World's problems, dropping as low as the lower 40s Monday from the mid-50s at the end of last week and the mid-80s pre-news last week.

The trader said both issues were "active" Tuesday "at all of the big desks, which traded all kinds of paper."

-Paul Deckelman contributed to this report

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