Lithuania sells $1.5 billion; Banco do Brasil brings tier 1 deal; EM wider as U.S. stock falter

By Paul A. Harris

St. Louis, Oct. 7 - Emerging markets debt was 5 basis points wider at mid-afternoon on Wednesday, according to a U.S.-based portfolio manager.

"We're weaker on the day with stocks," the buy-sider commented.

The EMBI-Plus index was at 319 bps bid, 7 bps wider on the session.

Earlier, shortly after the European close, a London-based trader said that the market had been very balanced on Wednesday, with much more two-way trading activity than has been the case in recent days during which the market had been virtually bid only.

Lithuania prices $1.5 billion

Lithuania priced a $1.5 billion issue of 6¾% fixed-rate notes due Jan. 15, 2015 (Baa1/BBB/BBB) at a 462.5 bps spread to Treasuries on Wednesday.

HSBC and RBS led the Rule 144A/Regulation S for life notes issue. SEB Trading and Capital Markets was the senior co-lead. DNB Nord Banka and Nordea Bank AB were co-lead managers.

Shortly after terms surfaced, the bonds were seen at par ¾ bid, 101¼ offered. However they subsequently faded, according to a U.S.-based investor who spotted them at 100.35 offered at mid-afternoon New York time.

The 6¾% notes due January 2015 represent Lithuania's only outstanding dollar-denominated global bonds.

However Lithuania has outstanding euro-denominated bonds maturing in 2012, 2014, 2018 and 2021.

Banco do Brasil brings perpetual

Banco do Brasil, Latin America's largest bank, will begin a roadshow on Thursday in Singapore for its dollar-denominated offering of fixed-rate subordinated tier 1 perpetual notes (expected Baa2), according to market sources.

The roadshow moves to Hong Kong on Friday, then to London on Tuesday and New York on Wednesday.

The Rule 144A/Regulation S deal is expected to price next week, pending market conditions.

Citigroup, JP Morgan and BB Securities are joint bookrunners.

The notes will feature a call provision which triggers a coupon step-up.

State-controlled Banco do Brasil is headquartered in Brasilia.

Kipco 6.6 times oversold

Tuesday's $500 million issue of 8 7/8% seven-year notes from Kuwait Projects Co. (Cayman) was 6.6 times oversubscribed, according to commentary from the issuer that surfaced Wednesday in the form of a company press release.

To recap, the deal priced at 98.725 to yield 9¼%, at the wide end of the 9 1/8% to 9¼% price talk.

BNP Paribas, Goldman Sachs & Co. and JP Morgan ran the books.

The deal represents the first international bond issue by a private sector corporate from the Middle East and North Africa region in 2009, as well as the first dollar-denominated bond issue by a Kuwaiti institution since August 2007, according to the company.

The order book closed at $3.3 billion. The allocation was widespread across the globe with the United Kingdom taking 28%, Europe 29%, Asia 22%, the Middle East 12% and offshore accounts 9% of the total order book. The issue attracted a wide range of investors, including leading fixed-income global institutions, Kipco said

Kipco's vice chairman, Faisal Al Ayyar, commented: "This is a landmark deal because we are the first private sector corporate in the region to tap the international U.S. dollar bond market in 2009, and the first Kuwaiti institution to do so since the credit crunch began two years ago.

"The issue will open the door for other institutions from Kuwait and the region. The funds raised will allow us to stagger our maturities, further diversify our investor base and provide the resources to progress our business strategy."

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