Slovenia, Texhong, Santander Brasil sell notes; volumes thin as investors await more supply

By Christine Van Dusen

Atlanta, Jan. 11 - The Republic of Slovenia, China's Texhong Textile Group Ltd. and Banco Santander Brasil SA priced notes while several other emerging markets issuers - including Brazil's Banco Daycoval SA, Indonesia's PT Sulfindo Adiusaha, China's Sinochem and the Philippines' SMC Power Holdings - advanced toward market on an otherwise quiet Tuesday.

"It's similar to yesterday, where an active morning was followed by a rather lackluster afternoon session," a London-based trader said.

Said another London-based market source: "It's been pretty slow here - rather disappointing, really. The street was better bid this morning, but volumes are light. Clients are still on the sidelines."

Spreads were doing fairly well as the European close neared, the London trader said. The JPMorgan Emerging Markets Bond Index Plus was tighter by about 10 basis points, with Argentina tighter by 21 bps, Venezuela by 15 bps and Ukraine by 15 bps.

"Overall it was a solid day, spread-wise, but we expect some paper to come out overnight and tomorrow morning, given the expected supply and the U.S. Treasury move," he said.

Slovenia, Texhong sell notes

The Republic of Slovenia's €1.5 billion 4 3/8% notes due Jan. 18, 2021 came to market Tuesday at 99.555 to yield 4.431%, or mid-swaps plus 125 bps, a market source said.

Barclays Capital, Deutsche Bank, Goldman Sachs, HSBC and Nova Ljubljanska Banka were the bookrunners for the deal, which was talked at mid-swaps plus 125 bps.

The notes were oversubscribed, with €1.7 billion in orders and with 90% from investors primarily located in France, Germany and the United Kingdom, a source said.

And China-based cotton and spandex fabric supplier Texhong Textile Group priced $200 million senior notes due Jan. 19, 2016 at par to yield 7 5/8%, a market source said.

Deutsche Bank was the bookrunner for the Rule 144A and Regulation S notes.

Proceeds will be used for general corporate purposes and to repay an outstanding credit facility, to redeem $25 million guaranteed index-linked notes due 2012 and for capital expenditures, including expansion of production facilities.

Santander Brasil does deal

In another new deal, the $650 million 4¼% notes due Jan. 14, 2016 from Sao Paulo-based lender Banco Santander Brasil priced at 99.262 to yield 4.416%, or Treasuries plus 250 bps, a market source said.

Deutsche Bank, Morgan Stanley and Santander were the bookrunners for the Rule 144A and Regulation S transaction, which was talked at a spread in the mid-200 bps over Treasuries area.

Also from the Brazilian banking sector, Banco Daycoval mandated Goldman Sachs, Standard Chartered and HSBC for a roadshow starting Thursday, a market source said.

The marketing trip will start in Hong Kong and then travel to Singapore, Miami, London, Geneva and Zurich before wrapping up on Jan. 19 in Boston.

Market watches LatAm names

Also on Tuesday, Brazil-based lender Banco Cruzeiro do Sul SA's five-year dollar-denominated senior notes were being whispered at a yield in the mid-8% area, a market source said.

Barclays Capital, BCP Securities and UBS are the bookrunners for the Rule 144A and Regulation S deal.

Another deal that was getting attention on Tuesday was the planned 10-year notes totaling up to $1 billion from Chile-based retail company Cencosud SA via JPMorgan, Deutsche Bank and Santander.

The spread was being whispered in the Treasuries plus 225 bps area.

"Leads have widened the spread talk," the London trader said. "So maybe demand isn't as good as we hoped."

He was also watching Banco do Brasil SA, which is on a roadshow for a euro issue of notes with Banco Votorantim, BB Securities, BNP Paribas and Deutsche Bank.

"There's not much evidence it will work," he said.

Sulfindo, Sinochem plan notes

For another upcoming deal, Indonesia-based caustic soda and chlorine producer PT Sulfindo Adiusaha has mandated Barclays Capital and Standard Chartered Bank as bookrunners for a dollar-denominated offering of five-year fixed-rate notes, a market source said.

The Rule 144A and Regulation S notes will be non-callable for three years.

A roadshow will begin Jan. 12 and travel from Singapore to Hong Kong, London and the United States.

Philippines-based SMC Global Power Holdings - a subsidiary of food and beverage company San Miguel Corp. - set out on a roadshow Tuesday with ANZ, HSBC and Standard Chartered Bank, a market source said.

The marketing trip started in Manila and will travel to Singapore and Hong Kong before finishing up on Friday in London.

And business conglomerate Sinochem Hong Kong Group set price talk for its planned $3 billion three-year renminbi notes at 1¾% to 2%, a market source said.

Deutsche Bank and Citic Securities are the bookrunners for the Regulation S-only senior notes, scheduled to settle on Jan. 18.

Middle East active

The tone in the secondary market was solid for Middle Eastern names, the London-based market source said. He pointed to Abu Dhabi-based Aldar Properties' 8¾% 2014s, which were seen trading at 108.90 bid, 109.40 offered.

"Aldar is up about a half a point, post-headlines this morning that the company will consider the sale of assets as well as calling a shareholders' meeting to approve a convertible bond issue," he said.

He was also following Lebanon, which saw its 6.1% 2022s trading at 100.50 bid, 101.00 offered, following Monday's close of 100.25 bid, 100.75 offered.

"After a very heavy December, prices have come back strongly," he said. "The long end is seeing the most interest with decent demand on the 2021s and 2022s lately."

He also noted that Qatar Islamic Bank's 3.856% notes due 2015 - which priced in September at par - were trading at 100.75 bid, 101.25 offered.

Bahrain trades up

Bahrain's 5½% 2020 notes - which closed Monday at 102 bid, 102.5 offered - ended Tuesday's European session at 102.12 bid, 102.62 offered. The London trader was looking to buy about $1.6 million of the notes at 102.30.

Bahrain Mumtalakat Holding's 5% 2015s finished Tuesday at 101.90 bid, 102.40 offered after Monday's closing of 101.37 bid, 101.87 offered. The trader was looking to buy about $2 million at 102.06.

Abu Dhabi Islamic Bank's 3.745% 2015 were trading Tuesday at 98.12 bid, 98.32 offered, following Monday's 98.05 bid, 98.25 offered.

Philippines bond underperforms

Meanwhile, the PHP 54.77 billion bonds due Jan. 14, 2036 from the Republic of the Philippines - which priced Jan. 5 at par to yield 6¼% and are payable in dollars - were trading down on Tuesday, a New York-based market source said.

"It's trading horribly," he said. "It's down over 2 points."

One problem in general is that valuations are too tight, he said.

"They really ripped it in during the second half of December and beginning of January and now people don't want to buy it up there," he said. "There's not really any pent-up selling. Everyone's just waiting for primary issuance, which is going to be pretty big this month."

Floating-rate notes in focus

Market-watchers were also talking Tuesday about the floating-rate note market.

"It's interesting to see that this will basically evaporate in mid-2012 in the Middle East and North Africa, at least on the senior side," the London trader said. "As the floating-rate notes that were issued in 2006 and 2007 come due, these are clearly being refinanced with benchmark fixed paper, mainly five year.

"That leads one to the sub market with paper coming due between 2015 and 2017. Economics-wise, it makes little sense for issuers to call these sub bonds," he said. "But these bonds could basically be the only floating-rate notes in the MENA space in about 12 to 18 months' time."

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