Emerging markets hushed, flows slow on mixed economic news; Alliance Global prices notes

By Christine Van Dusen

Atlanta, Aug. 13 - Mixed economic data and the fact that it was a summertime Friday meant that just one emerging market issuer priced a deal, trading was weak and the market continued to grapple with concerns about economic growth in the United States and Europe.

Yields on 30-year Treasuries dropped to lows not seen in almost a month while financial difficulties continued for Greece and for Ireland's banking sector, leading investors to believe that the European debt crisis is far from over.

And though there was a glimmer of hope provided by reports that U.S. retail sales increased in July and that consumer sentiment rose in August after falling hard the previous month, it wasn't enough to spur a lot of action for emerging market debt.

It was a "super slow day with little to no flows or news," a trader said.

Alliance Global prices notes

In the primary market, Friday saw Quezon City, Philippines-based food and beverage conglomerate Alliance Global Group Inc. price $500 million 6½% notes due 2017 to yield 6 5/8%, according to a filing with the Philippines Stock Exchange.

UBS was the bookrunner for the Regulation S-only deal, which was talked at 6 5/8% to 6¾%.

The deal was upsized from $400 million and was nine times oversubscribed, with orders of about $4 billion, according to the filing.

Proceeds will be used to finance the company's capital and project expenditures, to refinance existing debt of its subsidiary businesses and for general corporate purposes.

This followed the late-Thursday pricing of CHF 350 million 4½% loan participation notes due 2013 from Bank of Moscow at par to yield mid-swaps plus 379 basis points, a market source said. BNP Paribas and UBS were the bookrunners for the deal, which was talked at the mid-swaps plus 373 bps area.

But Friday was, in general, quiet.

China Oriental oversubscribed

In other news, the recent $550 million issue of 8% notes due 2015 from Hong Kong-based iron and steel manufacturer China Oriental Group Co. Ltd. - a Rule 144A and Regulation S transaction that priced at par - had a total book of $2.3 billion with more than 150 accounts involved, a market source said.

About 42% came from Asia, 29% from Europe and 29% from the United States, with fund managers accounting for 68%, retail 14%, banks 10% and insurers and pensions 8%.

Proceeds will be used for the acquisition of steel mills, for capital expenditures and for investments in iron ore assets.

The next issuer to bring a deal to market could be Turkey-based participation bank Kuveyt Turk, with a $100 million three-year sukuk issue of fixed-rate notes through KT Turkey Sukuk Ltd. and with bookrunners Citigroup and Kuwait's Liquidity House.

Also upcoming, market sources said, is a $175 million offering of bonds due 2022 from Philippines-based toll operator Coastal Road Corp. via Bank of America Merrill Lynch and Standard Bank.

LatAm in focus

On Friday the market was mostly working on digesting the recent $3 billion 12¾% notes due 2022 from Venezuela, which priced earlier in the week at par to yield 12¾%.

"That has placed a great deal of weight on overall Venezuela and made performance this week in particular highly negative," said Enrique Alvarez, a debt strategist with think tank IDEAglobal.

The focus, in general, remains on "yield hunting and yield accumulation," he said. "That's been the tone the entire week. We're ending the week on much the same foot."

There are "slightly firmer markups" in credits such as Brazil, a market source said.

Alvarez agreed. "That's been a laggard, year to date," he said.

He pointed to the sovereign's 2034 benchmark bond, which was at "1441/2, and that's a bond that in two months has risen over 10 points on a price basis," he said. "It's up over a dollar today."

Beyond that, he said, there's been a bit of "inched-in profit taking in Peru, Panama and Colombia, but nothing very significant," he said.

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