Profit-taking hits emerging market debt; Wing Hang raises $400 million; funds see $484 million inflows

By Reshmi Basu and Paul Deckelman

New York, April 12 - Emerging market debt faltered on profit-taking Thursday amid light volumes ahead of the release of the producer price index in the United States.

In other news, emerging market dedicated funds saw $483.9 million of inflows for the week ending April 11, according to EmergingPortfolio.com Fund Research.

Year to date, the market has seen $3.519 billion of new funds.

Meanwhile in the primary market, Hong Kong commercial bank Wing Hang Bank Ltd. sold a $400 million offering of perpetual upper tier 2 notes (A3/BBB+/A-) at 99.318 to yield mid-swaps plus 85 basis points.

The bonds came at the tight end of price guidance, which was set at 85 to 90 basis points more than mid-swaps.

The issue is non-callable for 10 years. If the bonds are not called, the coupon steps up to three-month Libor plus 185 basis points.

Citigroup, HSBC and UBS Investment Bank were lead managers for the Regulation S sale.

Adding to the corporate pipeline, Brazilian media company Globo Comunicacao e Participacoes plans to sell a $200 million offering of 15-year senior notes (Ba1/BB).

The issue will be non-callable for five years.

A roadshow is expected to take place in London and the United States.

Pricing is expected to take place after the investor presentations, subject to market conditions.

Deutsche Bank is running the Rule 144A and Regulation S transaction.

Also from Brazil, TAM Capital Inc., a wholly owned subsidiary of Brazilian air carrier, TAM SA, will start a roadshow next week for its $200 million offering of 10-year non-callable senior notes (/BB-/BB).

Citigroup and UBS are joint bookrunners for the Rule 144A with registration rights and Regulation S offering. Calyon Securities is the joint lead manager.

Coming out of Argentina, Compañía Latinoamericana de Infraestructura & Servicios SA (Clisa) plans to sell up to $100 million in five-year bullet bonds (B-).

The issue will be guaranteed by Clisa's subsidiaries, Benito Roggio e Hijos SA and Cliba Ingenieria Ambiental SA.

Proceeds from the sale will be used mainly to refinance existing debt and to cancel other obligations, according to a ratings statement released by Standard & Poor's.

BCP Securities is the manager for the Rule 144A transaction.

A roadshow is scheduled to take place in Miami, New York and possibly Boston.

The Buenos Aires-based issuer is a holding company for businesses in passenger transport, construction, road maintenance and environmental engineering.

Elsewhere, the National Agricultural Cooperative Federation plans to start a roadshow next week for an expected offering of $500 million in 10-year lower tier 2 notes.

The roadshow is scheduled to start in Singapore on Monday, April 16, then Hong Kong on Tuesday, April 17 and will then wrap up in London on Wednesday, April 18.

The deal will also be non-callable for five years.

Citigroup, ABN Amro, BNP Paribas, and HSBC are bookrunners for the Regulation S deal.

NACF is a Seoul-based umbrella organization for Korea's regional cooperatives.

EM sees profit taking

Emerging market debt succumbed to a bout of profit taking Thursday as high beta credits came under pressure. Bonds were seen a little weaker and yields and spreads a bit wider as the markets continued to digest Wednesday's release by the United States' Federal Reserve of minutes from the central bank's March meeting, which hint at a potentially more hawkish stance on inflation, should it become necessary.

Also, a jump in import prices played spoiler to market sentiment as the data hinted at higher inflation.

"Despite the positive performance of U.S. equities, the market traded with a cautious and weaker tone ahead of Friday's release of PPI data" in the United States, noted an analyst.

High beta credits Argentina and Venezuela underperformed overall benchmarks, noted one market source. Both credits saw investors unwind positions in both the credit derivative swaps and external debt markets.

Ecuador also posted losses after outperforming the market over the last two sessions as its spreads kicked out by 6 basis points.

At the session's close, the JP Morgan EMBI Global index lost 0.15% while spreads widened by 2 basis points to 164 basis points versus U.S. Treasuries.

However Brazil's 7 7/8% globals due 2015 were steady in trading at 113.82, yielding 5.64%.

Mexico's peso bonds hit

Yields on Mexico's peso-denominated bonds hit their highest levels in two weeks, also pressured upward by other U.S. data showing higher unemployment - a sign of slower growth, which could potentially cut into Mexico's exports to the north, its largest and most important trading partner.

The yield on the 10% bond due 2024, moved up 1 basis point to 7.62%, its highest level since March 30, while its price fell 0.11 to 123.02. Mexico's 6 5/8% global bonds due 2015 meantime eased to 107.68 from 107.75 on Wednesday, while its yield rose 3 bps to 5.36%.

Asia steady to weaker

Earlier in the day, in Asia bonds were seen steady to a little weaker, reacting to the news which broke during the U.S. trading day on Wednesday that the Federal Reserve might still choose to raise interest rates to battle inflation, which caused a downturn in the U.S. markets that day.

The actively traded 5-year CDS contract insuring holders of Philippines government debt against a default were seen to have widened out about 3 or 4 basis points from a day earlier, to around 114-117 bps, in line with the levels they had reached in New York on Wednesday.

Philippine cash bonds due 2031 were quoted at 113.25 bid, 113.75 offered, while the 2032 bonds were at 97.25 bid, 97.375 offered, both a bit easier on the day.

Meanwhile, the yield on Manila's 6¼% bond due 2016 rose 7 basis points to 7.41%.

Yields were also seen higher on Indonesian debt, with that country's 10% bond due 2017 up 3 bps to 9.83%.

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