Emerging markets weaker as investors worry about Dubai; Invitel, Homex price; Cemex talks notes

By Christine Van Dusen and Paul A. Harris

Atlanta, Dec. 8 - Emerging markets saw some weakness Tuesday as investors, formerly at peace with Dubai's debt-freeze plan, began to realize that the country's financial problems could be bigger and take longer to resolve than initially thought, market sources said.

Dubai World, the sovereign's development arm, will reportedly require more than six months to restructure $26 billion of its $59 billion in debt. This is seen as a more extended period than previously thought, and renewed investor fears that the fallout from this debt freeze could open a new chapter in the global economic crisis.

"The market is worried about Dubai at the moment," according to a London-based source, speaking at the European close.

The fact that Dubai announced last week that it would freeze less debt than originally expected had calmed investors, resulting in "a recovery in prices the last couple of days," another London-based market source said. But Tuesday's extension had investors concerned that "the process will be more drawn out and more problematic than initially thought. That's caused some nervousness."

In general, "risk aversion today is back in vogue," he said.

Also contributing to the overall weaker tone is the fact that investors are thinking ahead to the winter holidays and year-end, a buy-side source said.

"Things are wrapping up," the source said. "People are reluctant to take the other side of some of these trades at the moment. There's a lack of buyers."

Meanwhile, there was a bit of action in the primary on Tuesday. Hungary-based telecommunications company Invitel Holding A/S priced €345 million of 9½% notes due 2016 at 98.752 to yield 9¾%, and Mexico-based homebuilder Desarrolladora Homex SAB de CV priced $250 million of 9½% notes to yield 9¾%, according to market sources.

Also from Mexico: Monterrey-based Cemex Finance set price talk for its two-part benchmark-sized senior secured notes at the 9¾% area for the dollar-denominated tranche and 9 7/8% for the euro-denominated tranche.

Hungary's Invitel prices

Invitel priced €345 million of 9½% senior secured notes (B1/CCC+) due Dec. 15, 2016 at 98.752 to yield 9¾%, according to a market source.

The Rule 144A and Regulation S issue came in line with price talk, set at 9¾% to 10%.

Invitel issued the debt through its wholly owned subsidiary Magyar Telecom BV.

The bookrunner for the notes was Credit Suisse.

Proceeds will be used to repay bank debt and the company's 10¾% senior notes.

Invitel is a Budapest, Hungary-based telecommunications company.

Homex prices

Desarrolladora Homex priced $250 million of 9½% notes (Ba3/BB-/) at 98.426 to yield 9¾% or Treasuries plus 636 bps, a market source said.

The bookrunners for the Rule 144A and Regulation S for life deal were Credit Suisse and HSBC.

Homex is a Sinaloa, Mexico-based homebuilder.

Cemex talks benchmark

Cemex Finance set price talk for its two-part benchmark-sized senior secured notes (B/B+) at 9.75% area for the dollar-denominated tranche and 9.875% for the euro-denominated tranche, according to a market source.

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

Both tranches include a four-year non-call provision.

Cemex Finance is a subsidiary of Monterrey-based building materials company Cemex SAB de CV.

Nakheel plunges

A trader said that Dubai development company Nakheel PJSC's paper slipped badly on Tuesday, seeing its 3.172% notes slated to come due on Dec. 4 falling to a 47-49 context versus a closing level of 52 on Monday. He saw its floating-rate notes due 2010 at 33-35, down from 38 bid previously, and saw its 2¾% notes due 2011 dipping to 36-39 from Monday's levels around 42.

The latest slide comes amid a backdrop of potentially ominous developments.

News reports indicated that Dubai officials - who last month said they would ask the creditors of Nakheel parent Dubai World for a six-month "standstill" on its debt to allow it to reorganize, throwing world financial markets into a tizzy -- now are saying that six months will not be enough time for the troubled company to completely restructure its $59 billion of debt, with the prospect of additional delay creating the conditions for a further erosion of investor confidence.

The country's finance minister, Abdulrahman al-Saleh, said in a televised interview that "the period of six months would be too short for a full restructuring," and would only allow Dubai World to "focus on the creditors, the contractors and so on," rather than completely restructuring its obligations.

The official was also ambiguous about what role his government would play in standing behind the state-run development company's debt, saying that Dubai would support the group "as an owner" - but then adding that "we would like to emphasize the distinction between guaranteeing and backing. The company has received [a lot of] backing from the government since its inception."

On the other hand, a group of more than 25% of the holders of the Dec. 14 bonds - enough to block any agreement they do not like - reportedly said Tuesday that they would not go along with the emirate's request for a standstill on the debt of Dubai World and that of its subsidiaries like Nakheel, and warned that they expect to be paid in full when the $3.5 billion sukuk bond issue matures less than a week from now.

Paul Deckelman contributed to this report

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