Emerging markets play primary; Poland prices, others ready deals; Argentina outperforms

By Aaron Hochman-Zimmerman

New York, July 20 - Emerging markets remained under the control of the primary syndicate desks as new deals again drowned out trading.

Poland's $1.5 billion retap was the only new deal of the session, but plenty more issuers stepped into position to price during the remainder of the week.

Chile's Celulosa Arauco y Constitucion SA finished a roadshow while Abu Dhabi's Dolphin Energy Ltd. and Brazil's Centrais Eletricas Brasileiras SA waited to price.

The strong appetite in the primary seemed to turn ravenous on Monday, but only for the new paper.

Trading was "very quiet," a buysider said.

Still, what did trade was "trading pretty well," a syndicate official said.

Argentina added 2¼ points to its discount bonds due 2033 while on the corporate side the recently priced bonds of Colombia's Ecopetrol SA at 99.642 on Thursday were over 3 points better.

From the major markets, equities posted a relatively healthy day, but volatility crept up by just 0.06 to end at 24.40. The index is an often used gauge of market volatility.

As a sector, emerging markets tightened by 2 basis points to a spread of 403 bps, according to JPMorgan's EMBI+ index. The EMBI+ calculates the amount of extra yield investors will demand to hold assets in emerging market debt.

Poland prices retap

Poland priced a $1.5 billion reopening of its 6 3/8% 10-year senior unsecured bonds (A2/A-/A-) at a spread of Treasuries plus 275 bps.

The new bonds priced at 99.786 to yield 6.404%.

On July 7, the original $2 billion bonds priced at a spread of Treasuries plus 290 bps. In dollar terms, they priced at 99.788, also to yield 6.404%.

Barclays, Citigroup and HSBC acted as bookrunners for both registered deals.

Proceeds from the latest tranche will be used for general budgetary purposes.

Emerging Europe 'going well'

"Everything is going well," a Zurich-based trader said.

The strong primary remains open and clients are interested in recently priced deals as well as the upcoming offers, he said.

"The Middle East is going very well," he said as many of the recently priced issues looked an average of 2% higher on Monday.

Abu Dhabi's Dolphin Energy Ltd. is seen as a good play and will likely perform well when it prices, he said.

Later in the day, Dolphin Energy set a maturity of 10-year for its bond offering (Aa2/AA/AA).

Initial guidance and further details are expected during the coming week.

BNP Paribas and RBS will act as bookrunners for the deal.

Dolphin Energy is an energy firm 51% owned by Mubadala Development Co. of the Emirate of Abu Dhabi.

Also in the energy sector, the new bonds from Kazakhstan's KazMunaiGaz performed well initially, but has "come back a bit now," he said.

The $1.25 billion of 11¾% bonds due 2015, which priced at 99.014 on Friday, were quoted Monday at 99.65 bid, 99.8 offered.

Among upcoming offerings, Russia's national gas company OAO Gazprom will split its current deal into a dollar-denominated Rule 144A, Regulation S tranche and a euro-denominated Regulation S-only tranche.

JPMorgan and Morgan Stanley will lead the dollar-denominated deal and host the U.S. roadshow, while BNP Paribas and Societe Generale will lead the euro-denominated issue and will host the European roadshow.

Both roadshows end on Tuesday.

Gazprom is a Moscow-based government run energy firm.

On the sovereign side, Hungary's new €1 billion of 6¾% bonds due 2014 also "had a little interest this morning," he said.

Emerging Europe up on U.S. visits

Unites States vice president Joe Biden was in Ukraine on the heels of president Barack Obama's visit to Russia.

Biden assured Ukraine of U.S. support, but Biden stated that the United States had no favorite in the upcoming presidential election on Jan. 17.

President Viktor Yushchenko has been nationalistic and confrontational with Russia and trails in preliminary polls.

Prime minister Yulia Tymoshenko prefers a more acquiescent approach to Moscow.

After his visit to Ukraine, Biden will travel to Georgia.

The Russian government bonds due 2030 added 1 point to 99 bid, 99¼ offered, while the Ukrainian sovereigns due 2016 were seen at 69½ bid, 71 offered.

Meanwhile in Turkey, the progress on the Nabucco pipeline project "helps them for now, but for how long?" a trader asked.

On July 13, Turkey along with Austria, Bulgaria, Hungary and Romania signed more agreements to support the Nabucco gas pipeline project which will bypass Russia on its way from producers in the Caspian Sea to central Europe.

Turkey expects to receive at much as €400 million to €450 million in revenue each year from transport fees, the Hurriyet Daily News reported.

The plan is seen as a competitor to Russia's planned South Stream pipeline which would connect Russia with the Balkans, underneath the Black Sea.

After the July 13 agreement, Serbia then surprised Russia by backing the European Union-favored Nabucco plan.

Despite the successes for Ankara, the Turkish bonds were "probably not" up on the news, a strategist said after Serbia's perceived defection from the Russian side, but "they could be overvalued."

Nabucco is scheduled to be operational in 2014 when Azerbaijan will be its primary supplier.

Some have suggested that Iran as well as Iraq, Kazakhstan and Turkmenistan will one day supply gas to the pipeline.

The Turkish sovereigns due 2030 improved by ¼ point to 154½ bid, 155½ offered.

New deal, new banker in South Africa

In South Africa, Johannesburg-based paper manufacturer Sappi Ltd., issuing through, PE Paper Escrow GmbH, will hold a Tuesday investor call for its $500 million equivalent offering of five-year senior secured notes (expected ratings Ba2/BB).

The issue will come in tranches of dollar- and euro-denominated notes.

JP Morgan, Calyon Securities, Citigroup, HSBC and RBS Securities are joint bookrunners. KBC and Natixis Bleichroeder are co-managers.

The notes will come with three years of call protection.

The company will also put in place a new €650 million credit facility.

Proceeds will be used to pay off near-term debt maturities.

The issuing entity is an Austria-based special purpose vehicle.

Elsewhere in South Africa, Gill Marcus, chairwoman of the Absa Group will replace Tito Mboweni as central bank governor, reports said.

Marcus will act as a special advisor to the governor until she takes office in November.

The rand rallied on the news and was seen trading at 7.824 to the dollar.

"She's market-friendly," the buysider said, but added: "All currencies were doing well."

LatAm corporates cruise

In Latin America, Centrais Eletricas Brasileiras SA announced a size of up to $1 billion for its offering of 10-year senior unsecured fixed-rate bullet notes (/BBB-/BBB-).

A roadshow will be held on July 21 in London and on the U.S. west coast as well as New York and Boston on July 22.

Credit Suisse will act as bookrunner for the deal.

Proceeds will be used for general corporate purposes.

Eletrobras is a Rio de Janeiro-based government-owned power firm.

Colombia's Empresas Publica de Medellin is a similar deal, a trader said about the 10-year bonds via Bank of America Merrill Lynch and JPMorgan.

Still, "people like Eletrobras more," he said as the firm is "better known."

Brazil also presents a stronger backdrop.

"I can see how people would prefer Eletrobras over Medellin," a buysider added.

Meanwhile, Colombia's Ecopetrol, which priced $1.5 billion of 7 5/8% bonds due 2019 at 99.642 last Thursday, was well received by investors.

On Monday the bonds were quoted trading at 102.8 bid, 103 offered.

"We had a lot of Ecopetrol," he said in terms of volume.

The bonds "did unbelievably well," the buysider said; "I think it had to do with the locals not being allocated that much,"

Also, Celulosa Arauco y Constitucion SA ended a roadshow on Monday for a dollar-denominated 10-year bond (Baa2/BBB/BBB+).

JPMorgan has the active books, while BBVA and Santander Investments have the passive books.

"We're not that positive on the industry," the buysider said about pulp and paper.

Overlooked LatAm sovereigns

On the sovereign side, "Argentina had a good day," a buyside source said.

"People are getting a little more optimistic," the buysider said.

The 8.28% Argentine discount bonds due 2033 jumped 2¼ points to 55 bid.

"Other than that, everything is zero change," the buysider added.

In Brazil, the real had a strong day and was seen trading at 1.904, while the 11% Brazilian government bonds due 2040 were quoted at 130.85 bid.

In Venezuela, the 9¼% Venezuelan sovereigns due 2027 were spotted at 66½ bid.

Indo places samurais

Indonesia priced a ¥35 billion 10-year samurai bond (Ba3/BB-/BB) at par with a coupon of 2.73% to yield 2.73%.

The bonds were sold privately and guaranteed by Japan Bank for International Cooperation.

On April 16, Indonesia priced a $650 million five-year unsecured sukuk at par to yield 8.8%.

"That's good news," a buysider said about the bond sale carrying on after the bombings that rocked Jakarta on Friday.

The bonds themselves were not widely marketed, but mostly privately placed with Japanese investors.

"I guess this went to institutional in Japan," the buysider said.

Neither the bombings nor the additional supply shook investors off of Indonesia.

The Indonesian bonds due 2019 added ¾ point to 131 bid.

Meanwhile, the Philippines' bonds due 2030 were quoted at 123 bid.

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