Emerging market debt firmer as Brazil leads the way; Colombia reopens 8¼% bond due 2014

By Reshmi Basu and Paul A. Harris

New York, July 12 - Emerging market debt was higher Tuesday, as Brazil made gains on news that the government's popularity was not sliding amid its recent troubles.

Despite ongoing allegations of a kickback scandal, a poll released on Tuesday showed that president Luiz Inacio Lula da Silva has kept out of the political fray. The approval rating for his government increased to 40.3% in July from 39.8% in May, according to the Sensus Institute for the National Transport Confederation.

"There's been a lot of speculation, as there always is, on the political front," according to Enrique Alvarez, Latin America debt strategist for think tank IDEAglobal.

"But you see that Lula's latest numbers as far as popularity are on the rise, so there seems to be a lull in the political action," he added.

That pause combined with a strong currency market is giving support to the external debt market, he remarked.

Brazil was up during the session. The Brazil C bond added a quarter of a point to 102 3/8 bid while the bond due 2040 gained 0.90 to 119.05 bid.

Argentina up

Also in trading, Argentina continued to perform well. The Argentina discount bond due 2033 was up 1.30 points to 97.10 bid while the Boden bond due 2012 moved up 0.70 to 91.60 bid.

"They've done well with domestic issues," noted Alvarez.

"The local demand has been there. They are very likely flushed with liquidity and that's a good way to sop it up."

Also, Argentina has been able to take advantage of investors' search for yield.

"Argentina, which was off-limits, has all of the sudden come on line again," Alvarez added.

Meanwhile, paper from the Philippines settled down Tuesday in response to president Gloria Arroyo's appointment of Margarito Teves as the financial secretary, according to a market source.

Previously, Teves was the chief executive office of Landbank of the Philippines.

The source said that the local currency market retraced some losses in response to the news.

In Asian trading Tuesday, the Philippine's five-year credit default swap was tighter by six basis points, said the source.

At the end of the trading session in New York, the Philippine bond due 2030 was up 1.63 points to par while the bond due 2008 was down 0.12 to 108¼ bid. The bond due 2025 was up 1¾ points to 110½ bid.

Colombia reopens 2014 bonds

In the primary market, the Republic of Colombia retapped its 8¼% global bonds due 2014 (Ba2/BB/BB) to add $500 million.

The retap priced at 106 5/8 to yield 7.266%.

"It looks to be in line with the prior '14," said Alvarez. "Maybe they gave up five to seven basis points to get it placed."

There was acceptable demand, he added.

Goldman Sachs & Co. and Merrill Lynch & Co. were the bookrunners for the Securities and Exchange Commission registered bonds.

Meanwhile in trading, the Colombia 2014 was seen at 107 bid.

And semiconductor assembly and testing services company Stats ChipPAC Ltd. priced a $150 million issue of five-year senior secured notes (Ba2/BB) at par on Tuesday to yield 7½%, tight to the inwardly revised 7½% to 7 5/8% price talk.

The company initially talked the notes at a yield in the 7¾% area.

Credit Suisse First Boston and Deutsche Bank Securities were the bookrunners for the debt refinancing and general corporate purposes issue.

Just before the terms emerged, a source told Prospect News that the book on the $150 million offering contained $800 million of orders.

Later in the day sources said that the deal had gone very well.

One of the sources said that as the terms on the new deal were announced Stats ChipPAC's 6¾% notes due 2011 (also Ba2/BB) were yielding 7.55%.

"The new notes priced more or less right on top of where the existing ones were priced," the source commented.

Stats ChipPAC is headquartered in both Singapore and Fremont, Calif., and both straight-up high-yield players and emerging markets accounts had been looking at the deal.

Digicel to the starting line

Another corporate issuer that is expected to receive attention from both junk and emerging markets investors, Caribbean wireless operator Digicel Ltd., will hit the road on Thursday with a $250 million offering of seven-year notes (B3/B) via JP Morgan and Citigroup.

The company will use the proceeds to repay debt and fund capital expenditures.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.