Banks price deals; new sovereigns coming from Vietnam; market mostly lower; Turkey up on poll result

By Paul Deckelman and Aaron Hochman-Zimmerman

New York, July 23 - The week began with mixed reviews in the emerging markets primary, but two deals were able to price amid the tumult, both banks - Standard Bank of South Africa Ltd. and Global Yatirim Holding AS - and details emerged on a third bank deal that came late on Friday, this from Banca Mifel SA.

In trading, prices were generally lower Monday. But Turkey stood out as a strong perfomer following election results.

The weekend was anxious, according to an emerging markets strategist, but the strong showing by Turkey's AK Party in its victory Sunday caused a ripple of hope to "spill over across emerging markets," an emerging markets strategist said.

"Risk appetite is quite strong with U.S. equities up," the strategist said, adding the ongoing enthusiasm for risk will be guided by further data releases out of the United States this week.

"The market is a mess and there are less players around to prop it up," said an emerging markets syndicate official, adding that conditions are still pretty jittery.

Aside from the benchmarks, most of the high beta names have been unable to get to levels where the offers look attractive enough; "it will be an interesting fall," the official said.

The market is "a little weaker overall," a buyside source said, although local markets have held up better.

Local markets will be the place to watch as an indicator of risk appetite, the buysider added.

Across the board, "people are still guessing," a sellsider said summarizing market sentiment.

Two banks complete deals

Despite what many were calling a volatile market, two banks priced a combined $600 million in Monday's session - and terms emerged on a late-Friday deal for a third bank.

Standard Bank of South Africa sold $500 million of five-year senior floating-rate notes (Baa1/BBB+) at 99.782 with a coupon of Libor plus 45 basis points.

Deutsche Bank and Standard Chartered had the books for the deal.

The bonds are due July 30, 2012.

Turkey's Global Yatirim priced its $100 million five-year fixed-rate guaranteed loan participation notes (//B) at par with a coupon of 9¼%.

The price matched the initial guidance in the 9¼% area.

Deutsche Bank took the books for the deal.

Late Friday, Mexico's Banca Mifel completed the sale of $100 million perpetual tier I notes (B-/BB) at par with a coupon of 11%.

The offer which had been lowered to $100 million from $120 million widened from initial guidance in the 10½% area.

Deutsche Bank had the books for the deal.

The bonds are callable at par on July 25, 2012.

Viet bonds

Meanwhile, the Socialist Republic of Vietnam (Ba3/BB/BB-) is expected to issue a 10-year local-currency sovereign possibly worth up to $1 billion.

Barclays, Citigroup and Deutsche Bank will bring the deal, which is expected to show up on the radar in September.

"Recent volume may force everyone to reset their calendars a bit," an emerging markets syndicate official said.

"I'd be wary even of sovereign issues at this point," a buysider said.

Hong Kong corporate plans deal

Hong Long Holdings Ltd. announced plans to sell dollar-dominated senior notes through Citigroup.

The size and terms of the offer are still undetermined.

The deal will move forward following a roadshow "should market conditions permit," according to a press release.

The Hong Kong-based land developer expects to apply the net proceeds from the sale to the acquisition and development of property projects. In addition, it will repay a portion of its debt, including a loan from Lehman Brothers which is also acting as a joint manager for the bond issuance.

EM lower in trading

Emerging market debt was seen generally lower in the secondary market on Monday, as the old bugaboo, the subprime lending crisis, continued to once again make itself felt, in a continuation of the negative sentiment which had been seen on Friday.

An early attempt to put Friday's weakness in the rear-view mirror and push back to the upside fizzled.

Turkey higher

But while most emerging names, such as Venezuela, Ecuador and the Philippines were seen either lower in the cash markets or wider in the credit default swaps (CDS) contract market. Turkey's bonds were seen to have firmed solidly, after weekend parliamentary elections there gave a solid victory to the ruling AK (Justice and Development) Party of prime minister Recep Tayyip Erdogan, considered a pro-business moderate.

The country's benchmark 11 7/8% global bonds due 2030 were seen having pushed up by more than half a point to the 154 level, although that was off a little from their earlier gains of almost a point on the day. The yield was down 6 bps to just above the 7% level.

While Erdogan's party got 47% of the popular vote, well up from 32% which it received in the 2002 elections, and will get about 340 seats in the 550-member parliament, it still will lack the legally mandated two-thirds majority to be able to ram through changes in the country's constitution, including vesting the election of Turkey's president in the hands of the voters.

Ecuador weak

Elsewhere, EM bonds were seen mostly easier on relatively restrained volume.

Ecuador's bonds widened out by more than 15 bps on the day to finish at a yawning spread of more than 720 bps above U.S. Treasuries, their prices falling in line with economy minister Ricardo Patino's declaration that Quito could seek to restructure its debt "at any moment," renewing investor fears that the left-wing populist government of president Rafael Correa might make good on its previously announced intentions of not paying all of the more than $10 billion of foreign debt racked up by the country's predecessors, which it has called "illegitimate" and "corrupt."

While Ecuador has so far met its international obligations, such bellicose anti-debt statements from Patino and Correa have periodically roiled the markets since the latter's election as president last November.

Patino on Monday named the members of a 13-member commission, which includes himself, that will audit the debt and come up with a restructuring plan.

Also in the Latin American market, the bonds of Venezuela- like Ecuador, a volatile credit with much political risk attached to it - were quoted as having widened out about 10 bps versus Treasuries, to an average spread of just over 300 bps.

Brazil's benchmark 11% global notes due 2040 was seen down nearly 2/3 point on the day to 131.125

A New York-based trader in Asian debt said that in his market, "it's really more like we're following other markets, rather than leading that much."

He said that initially, the market tone was "a bit better" - before things widened out a little during the afternoon, "as the general credit market backdrop has worsened."

That having been said, though, he added that most things held "within a pretty narrow range."

The modest New York retreat followed "a pretty weak session in Asia, with pretty much everything widening," particularly bank capital issues and "the go-go emerging market sovereign CDS" contracts.

The most widely traded among the latter is the five-year credit default swaps contract protecting investors in Philippine sovereign debt, whose price has risen sharply over the past few sessions.

In Asian dealings, he said, the cost of a contract got as high as 138/142 bps, up about 5 bps from Friday's New York close. In Monday's New York dealings, that eased slightly, to 135/138 bps - but remains far above its month-ago level around 98/102 bps.

Pakistan CDS wider

Pakistan, he said, was another sovereign credit whose associated CDS contracts had widened out "notably," rising about 200 bps over the past week or so to as wide as 450 bps [during Monday's session] on the back of geopolitical concerns" about the increasingly embattled government of president Pervez Musharraf, "and some research coming out from a couple of investment' houses."

There is also something of supply overhang following the country's sale in May of $750 million of new 6 7/8% bonds due 2017.

"There are still a few bonds around, and that's kind of adding to the weakness."

Apart from the sovereign-linked CDS contracts, he said that prices on CDS linked to Japanese and Indian bank capital "were anywhere between 10 [bps] and 20 [bps] wider today."

He said there were "definitely signs of panic - panic selling and buying of CDS, certainly in Asia," although U.S. trading in such paper was "kind of thin."

A combination of factors was seen, including continued investor angst over the troubles of the U.S. subprime lending sector and the ripple effect this may have on debt markets worldwide, as well as "relative supply," the trader said.

"There's been a lot of supply in Indian bank paper this year," he noted, "and because of that, that sector is going to be vulnerable to weakness in a downturn, just because of the relative liquidity."

Overall, the average spread between EM bond yields and U.S. Treasuries - measured by the widely followed EMBI+ index compiled by JP Morgan & Co. - was seen having widened about 2 bps on the day to around 182 bps, the widest it has been in some four months.

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