Pertamina, Lebanon, Agroton set price talk as Greece, IMF news keeps investors cautious

By Christine Van Dusen

Atlanta, May 16 - Indonesia's PT Pertamina Persero and Lebanon were among the few bond issuers to take steps toward the market on a Monday that saw emerging markets assets stay fairly strong - even as Greece's woes, the arrest of the International Monetary Fund chief and slower-than-expected manufacturing activity in New York hurt risk appetite.

"Concerns about euro-area sovereign debt have continued to weigh heavily on risk assets ahead of key meetings early this week to discuss Portugal, Ireland and Greece," according to a report from RBC Capital Markets. "Speculation about a possible restructuring of Greece's debt has been particularly damaging to sentiment, with the arrest over the weekend of IMF managing-director Strauss-Kahn further complicating the outlook."

Early in the day the JPMorgan Emerging Markets Bond Index Plus spread widened 7 basis points to Treasuries plus 279 bps, near the high end of its recent trading range of 240 bps to 280 bps. By day's end, the spread closed flat, with most sovereigns tighter or wider by about 3 bps.

"There's generally a softer tone in the market after the Greece debt worries," a London-based trader said.

Still, EM was in fairly good shape, especially considering the deterioration seen in other markets, a New York-based market source said.

"The low-beta stuff is unchanged in spread over the last week, and that's with the S&P down about 2% now," he said. "The higher-beta sovereigns are a little softer. But any kind of sell-off is pretty low-volume. Bids aren't really running away."

Pertamina gives guidance

Indonesia-based oil and gas company Pertamina set price talk for its planned dollar-denominated issue of 10-year benchmark-sized notes at 5½% to 5 5/8%, a market source said.

Citigroup, Credit Suisse and HSBC are the bookrunners for the Rule 144A and Regulation S notes, which include a change-of-control put at 101% if the government holds less than 50% of the company's shares.

"There's lots of interest in Pertamina," a market source said. "At 5½%, it offers a pick-up of 60 bps to the sovereign."

And Lebanon set price guidance for its planned two-tranche issue of notes due 2019 and 2022. The dollar notes due 2019 were talked at the 9% area while the tap of the sovereign's existing 6.1% notes due 2022 was talked at the 6½% area.

The original issue of 2022 notes totaled $225 million and priced at par.

Byblos Bank, Fransa Investment and HSBC are the bookrunners for the Regulation S notes, which are expected to price on Tuesday.

"That looks set to go well," a market source said.

Agroton talks notes

Also setting price guidance on Monday was Ukraine's Agroton plc. The agriculture company talked its planned issue of three-year dollar notes at the 12% area.

VTB Capital and Dragon Capital are the bookrunners for the Regulation S-only deal, which is expected to price early this week.

And the Republic of Poland announced plans for an issue of euro- or dollar-denominated notes by the end of 2011, a market source said.

The sovereign recently sold $1 billion 5 1/8% notes due 2021 at 98.831 to yield 5.277%, or mid-swaps plus 170 bps.

Citigroup, Goldman Sachs and RBS were the bookrunners for the Securities and Exchange Commission-registered notes.

"The last couple of sessions, the primary market has been pretty quiet," the New York-based market source said.

MENA firms

In trading, the Middle East and North Africa opened on Monday somewhat firm.

And the market continued to favor the recent issue of $500 million 7½% notes from Nigeria's GTB Finance BV, guaranteed by lender Guaranty Trust Bank plc.

"There's still time to marvel at the performance of the new GTB 2016s, which are now trading at 101," the London-based market source said.

The notes - which priced May 12 at 98.981 to yield 7¾% - were later seen at 101.125 bid, 101.50 offered.

"They are still very strong," a trader said.

Finansbank undulates

Looking at other banks, the recent $500 million 5½% notes due 2016 from Turkey-based Finansbank AS were on a rollercoaster ride on Monday, a trader said.

Early on Monday, the bonds were seen retracing from Friday's high, along with other Turkish lenders. The notes were trading at 96 bid, 96.50 offered after pricing on May 5 at 99.384.

"It has now closed roughly unchanged as the bearish tone turned more constructive in the afternoon," the trader said. "All of the other corporates were quiet with lower support prices on the screens."

KKB, BTA improve

Meanwhile, banks from Kazakhstan also began to bounce back. The recent $300 million 8½% notes due 2018 from JSC Kazkommertsbank (KKB) - which priced at 99.353 to yield 8 5/8% - were seen at 95 bid, 96 offered early Monday before moving up to 97.50 bid, 98.50 offered.

"Still, KKB still looks all wrong to us," the trader said. "KKB 18's have to be capped at reoffer as you know they'd love to issue more."

Kazakhstan's BTA Bank saw improved performance after recent weakness.

"There is a technical bounce in BTA bonds after days of falling," a market source said. "The 2018s are up from 92 bid to 95.75 in two hours, but it's a long way from last year's peak at 117."

But investors should remain cautious, the London-based market source said.

"Being that this is Kazakhstan, you have to feel this story is not over yet," he said.

Inflows rise

Emerging markets bond funds saw inflows of $898 million for the week ended May 11, according to data tracker EPFR Global. That's up from the $652 million reported during the previous week.

Local currency funds took in money at about twice the pace of hard currency funds.

"I think dollar weakness is part of it, and yield is up there too," said Cameron Brandt, senior analyst with EPFR. "There are not a lot of alternatives that give a half-decent return."

He said he was surprised to see flows grow during the week, though, given the turmoil with Greece and other market uncertainties.

"The flows of the past couple of weeks have contradicted the general rhetoric of investors," he said. "They definitely are sounding a bit more cautious and talking about struggling to find value."

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