High-grade emerging corporates beat stocks; ENAP prices $300 million; Digicel taps 12% notes

By Paul A. Harris

St. Louis, June 30 - Emerging markets held their ground as stocks sold off on Tuesday, market sources said.

"Spreads were unchanged on the day," said an emerging markets portfolio manager who spoke on background.

The EMBI-plus index was unchanged at a spread of 446 bps bid 45 minutes before the New York close, the buy-sider said.

At the same time, the EMBI Global was at 449 bps bid,1 bp tighter from Monday's 450 bps bid.

Meanwhile the primary market saw a modicum of activity, with high-grade paper from a Latin American refiner and junk from a Jamaican telecom.

ENAP brings $300 million

Empresa Nacional del Petroleo SA priced $300 million of 6.25% 10-year notes Tuesday at Treasuries plus 287.5 basis points, atop price talk.

The notes (A3/BBB/A) priced at 99.144 to yield 6.367%.

Bookrunners were BNP Paribas Securities, HSBC Securities and Banco Santander.

Digicel sells $250 million

Elsewhere, Jamaica's Digicel Ltd. participated in a Tuesday transaction in which $250 million of its 12% notes due April 1, 2014 (B1//B-) were sold.

The transaction featured a $160 million add-on to the company's $350 million existing issue. In addition, company owner Dennis O'Brien sold $90 million of the 12% notes due 2014 which he held.

The notes were priced at 99.50 to yield 12.124%.

The re-offer price came rich to the 99 area price talk.

Credit Suisse, Citigroup and JP Morgan were joint bookrunners.

The company will use its share of the proceeds from Tuesday's transaction for general corporate purposes.

None of the proceeds from Dennis O'Brien's portion of the sale will go to the company.

Russian paper holds in

A trader in London, who focuses on Russian and emerging European corporate paper, said that European stock prices were falling in tandem with American stocks late in the London session - early in the New York morning.

Although the financial headlines were blaming a dip in June consumer sentiment, the trader was keeping an eye on crude oil prices which had slipped a couple of dollars off the session highs.

"That took the bid out of the market," the trader said.

Nevertheless, Russian benchmark paper had hung in nicely, the source added.

OJSC Vimpelcom's 8 3/8% notes due 2013 were at 92¾ bid, 93 offered, somewhat off the day's highs.

Evraz Group SA's 8 7/8% notes due 2013, meanwhile, had eased to 84 bid, 85 offered.

"That's been a particular mover because the technicals have been fairly tight," the trader remarked.

"They popped up a couple of points early on. But it's difficult to say how much they have come off because the bid has just disappeared.

"It's 7 o'clock in Moscow. London is hot and humid. And people are drifting out the door.

"So it's more that the market has lost interest, now."

In the sovereign space, the Russian Federation's 7½% bonds due 2030 were at 98½ bid, 98 5/8 offered, late in the London Tuesday session - ¼ point higher than they were late Monday.

Rotating into credit

A New York-based trader who follows Asian credit, and who spoke just after the close on the East Coast, also saw corporate paper holding in against the backdrop of falling stocks.

The Tuesday session went "strangely well," said the trader, who conceded seeing some month-end selling on the investment grade/sovereign side.

"Aside from that the market is trading well," the source said.

As risk markets in general have sold off over the past 10 days or so, high-grade Asian corporates merely consolidated, as opposed to continuing to tighten.

"However in the past couple of days we've begun to move tighter again," the trader said.

It's possible that investors are rotating out of stocks and into credit, the source allowed.

Stellar tightening

Taking note of some recent relatively liquid deals, the trader was seeing a continuation of "stellar tightening" in Asian high-grade names.

Among sovereigns, Korea's 5¾% notes due 2014 were 260 bps bid, 250 bps offered at Tuesday's close, 15 bps tighter that the 275 bps bid, 265 bps offered levels posted a week ago.

Further out on the Korea sovereign curve, the 7 1/8% notes due 2019 were at 255 bps bid, 245 bps offered, also 15 bps tighter than week-ago levels of 270 bps bid, 260 bps offered.

Both of these deals priced at 400 bps-plus spreads, the trader recounted.

In corporates, Hutchison Whampoa Ltd.'s 7 5/8% senior unsecured bonds due 2019 were 20 bps tighter on the week.

Elsewhere, the 5 1/8% notes due 2019 of Hong Kong-based Kowloon-Canton Railway Corp. were 12 bps tighter on the week.

"There is good liquidity," the trader said.

"There is buying on the part of Asian institutions, and private retail buying in Asia.

"And the U.S. accounts are buying."

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