Emerging market debt shrugs off weaker oil prices; GITI Tires sets talk

By Reshmi Basu, Paul Deckelman, and Paul A. Harris

New York Jan. 16 - Emerging market debt was better bid Tuesday as the market was able to shrug off declining oil prices as well as a dull performance by U.S. equities.

In the primary market, China's GITI Tire Pte. Ltd. talked its $200 million offering of five-year senior secured notes (B3/B-) at a yield in the 12½% area.

The offering, which will not grow not grow in size, is expected to price before the end of the week.

Credit Suisse and Lehman Brothers are leading the Regulation S offering.

Adding to the corporate pipeline, Kazakhstan's JSC Tsenabank (/B-/B-) plans to start a roadshow for a dollar-denominated offering of three-year eurobonds this week.

The roadshow will start in Hong Kong on Thursday, Jan. 18, move to Singapore on Friday, Jan. 19, then London on Monday, Jan. 22, Switzerland on Tuesday, Jan. 23 and wrap up in Frankfurt and Vienna on Wednesday, Jan. 24.

The issuer has mandated Citigroup and Dresdner Kleinwort to run the Regulation S transaction.

EM firmer

Returning to the secondary market, emerging market debt was firmer Tuesday on a dollar basis, while spreads were unchanged on the JP Morgan EMBI+ index.

A trader in Latin American bonds noted that the region had "a decent tone to it," while spreads were "a little bit tighter on most of these credits today [Tuesday]."

Meanwhile sources noted that softer oil prices were having a negligible impact.

Oil-producing countries such as Mexico and Venezuela "seemed to be able to ignore some weakness in oil prices," noted the trader.

Furthermore, the trader noted that longer maturity sovereign bonds "outperformed any other parts of those curves."

During the session, the Mexico bond due 2026 added 0.63 to 160.625 bid, 161.625 offered.

Elsewhere, Venezuela was able to erase some of last week's losses as its spreads narrowed by 4 basis points, according to a market source.

In trading, its bond due 2027 gained 0.95 to 124.50 bid, 125.05 offered.

Brazil up on buyback news

Turning to Brazil, another source noted that the credit was bolstered by Monday's announcement that the country would extend its sovereign's external debt buyback program into 2007.

During the session, the bellwether Brazilian bond due 2040 added 0.15 to 132.45 bid, 132.50 offered.

And Argentina rallied following Moody's announcement that it revised the outlook on the sovereign's B3 rating to positive from stable, citing a benign economic outlook.

Ecuador holds on

Turning to Ecuador, the country "was actually able to end almost unchanged after the statements about debt restructuring," a source said.

In trading, the Ecuadorian bond due 2012 was down 1 point to 82 bid, 84 offered while the bond due 2030 was unchanged at 78 bid, 79 offered.

On Monday, newly elected president Rafael Correa took office and said he wanted an impartial international panel to look into what he called the "corrupt" structure of some of the country's $11 billion of foreign debt incurred by previous regimes.

"An impartial and transparent international tribunal must decide the debt to pay, the capacity to pay and the method of payment from indebted countries," he said at his swearing-in ceremony, at which he described the terms of a particular debt swap in 2000 as "inadmissible."

It was the latest in a series of statements from Quito that have rattled the financial markets, raising the specter that the nation could decide to default on some of its debt, including a $135 million bond interest payment due next month.

Ecuador on Tuesday said that it would seek advice on debt restructuring from neighboring Argentina - which defaulted on its approximately $100 billion of foreign debt in 2002, the largest such modern-day sovereign debt default.

Argentina ultimately restructured much of its debt, persuading debt-holders - or in some cases, essentially forcing them - to accept far lower nominal values and longer maturities on the new debt it issued to replace the defaulted issues.

The trader said that no one issue stood out in the region, with most of them "three or four basis points tighter."

He said there had "not been much reaction" to the changing of the guard in Ecuador, with the bonds sending pretty much unchanged.

AES unchanged

High yield bond traders meantime saw little reaction in the junk bonds of AES Corp., even with Venezuelan officials saying the country expected to complete a nationalization of the Arlington, Va.-based global electric power producer's 85% stake in Electricidad de Caracas, which supplies power to Venezuela's capital, in the second quarter.

Venezuelan president Hugo Chavez last week outlined his government's intention of nationalizing privately owned telecommunications and electric power networks as part of his efforts to transform the country into a socialist state.

During the session, AES' 7 ¾% notes due 2014 notes were unchanged at 105.375 bid, 106.125 offered.

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