Deal flow surges on better economic data; BNDES, Powerlong, Korea Hydro, others price

By Christine Van Dusen

Atlanta, Sept. 9 - Emerging market issuers finally shook off the summertime blues on Thursday - embracing better economic news out of the United States - and got back to business with gusto, opening up the new deal pipeline.

Yields on 10-year Treasuries climbed as much as 8 basis points by mid-afternoon as U.S. jobless claims fell more than expected for the week.

This didn't translate into a great deal of activity in the secondary market, sources said. But the primary market was nearly ablaze.

"They want to come and get deals done," said Luz Padilla, portfolio manager for the DoubleLine Emerging Markets Fixed Income Fund. "I don't blame them. If you miss the window it can be more costly, so you might as well. There are enough people back and enough demand. All of the recent new issues have been oversubscribed."

LatAm heats up again

Thursday's focus was primarily on the spate of new issuance.

Brazil-based development bank Banco Nacional de Desenvolvimento Economico e Social (BNDES) priced €750 million 4 1/8% notes due Sept. 15, 2017 at 99.298 to yield 4.243%, or mid-swaps plus 200 bps, an informed market source said.

BNP Paribas, Credit Suisse and Deutsche Bank were the bookrunners for the Rule 144A and Regulation S offering, which was talked at mid-swaps plus 200 bps.

Lima, Peru-based lender Banco de Credito del Peru SA priced $800 million senior unsecured notes due 2020 to yield Treasuries plus 265 bps, a market source said.

Bank of America Merrill Lynch and Deutsche Bank were the bookrunners for the Rule 144A and Regulation S deal, which was talked at the Treasuries plus 275 bps area.

Other details were not available late Thursday.

Also from Latin America, lender Banco Cruzeiro do Sul SA is planning an issue of dollar-denominated subordinated notes due 2020, a market source said.

Barclays, BCP Securities and UBS are the bookrunners for the deal, which will be marketed on a roadshow on Sept. 13 and Sept. 14. Pricing is expected during the Sept. 13 week.

And Cayman Islands-based JBS Finance II Ltd.'s planned $300 million add-on to its $700 million 8¼% notes due 2018 was whispered with a yield in the high 7% area, a market source said.

The original notes priced in July at 99.634 to yield 8½%, or Treasuries plus 614.2 bps.

JPMorgan and Santander were the bookrunners for that Rule 144A and Regulation S deal.

IMPSA, Telemovil plan notes

The day also saw Argentina-based wind and hydropower equipment producer Industrias Metalurgicas Pescarmona SAIC planning to issue notes.

UBS Investment Bank and Bank of America Merrill Lynch are expected to be the bookrunners for the deal, which will most likely settle at the Oct. 5 conclusion of a tender offer for any and all outstanding 11¼% notes due 2014.

Proceeds of the new note issuance will be used to purchase tendered notes.

Sources also were whispering about a possible issue of $450 million notes due 2017 from telecommunications firm Telemovil El Salvador.

"I think everyone was expecting this," Padilla said. "Everyone was waiting for new issues and everyone felt that after Labor Day we were going to start to see them because people came back from vacation. And the issuers have been lining up, given where yields and spreads are. It makes a lot of sense."

Even if the global backdrop gets tricky again, "I still expect new deals to come, just not as many," she said. "But I always felt the new issue pipeline was going to be strong. Now that everyone's back, they're all starting to rush to the door."

Powerlong, Korea Hydro price

With the exception of the Middle East and Africa, issues are "coming from all over," she said. "There are Korean names coming, with the utility and bank space very well represented."

Indeed, Seoul-based Korea Hydro & Nuclear Power Co. priced $500 million 3 1/8% notes due Sept. 16, 2015 at 98.754 to yield 3.398%, or Treasuries plus 185 bps, an informed market source said.

Bank of America Merrill Lynch, Citigroup, Deutsche Bank and HSBC Holdings were the bookrunners for the Rule 144A and Regulation S deal, which was talked at the Treasuries plus 190 bps area.

Proceeds will be used for general corporate purposes and to fund a three-month bridge loan.

The day also saw state-owned natural gas company Korea Gas Corp. price CHF 200 million 2¼% notes due Oct. 6, 2015 at 100.287 to yield mid-swaps plus 108 bps via UBS, a market source said.

Also pricing from Asia was China-based property developer Powerlong Real Estate Holdings, which sold $200 million 13¾% notes due Sept. 16, 2015 at par, a market source said.

HSBC and RBS were the bookrunners for the Rule 144A and Regulation S offering, which was talked at 13¾% to 14%. Proceeds will be used to finance existing and new property projects and for general working capital.

Russia gets in the game

"We're seeing Central and Eastern Europe and Russian names too," a source said.

Russia-based lender Sberbank, for one, is planning a non-deal roadshow - which some sources speculate will actually spawn a eurobond issue of notes - from Sept. 14 to Sept. 16 via bookrunners Barclays, BNP Paribas and ING, a source said.

Also from Russia, lender Alfa Bank is expected to bring to market its dollar-denominated benchmark-sized issue of notes via Deutsche Bank and UBS following a roadshow from Sept. 13 to Sept. 17.

And Gazprombank will soon price a $400 million to $500 million add-on to its existing $500 million 6¼% notes due 2014. The Regulation S-only offering with Barclays and JPMorgan will yield 6.1%, a source said.

Despite all this activity on the supply side, volumes have remained thin and prices haven't moved much, a source said.

"Volumes have been a little light this week," the source said. "It's partly a continuation from the shortened week, which is being made a little bit shorter by the Jewish holidays. That didn't lend itself to strong volumes."

Telemar, Vale get attention

Venezuela saw some movement on Thursday, with the new 2022 bonds - which priced in August at par to yield 12¾% - trading at about 79, down from a high of about 85.

"They've had a little bit of giveback," a market source said. "Who knows what drives it sometimes? This time there was another rumor of new issuance."

The Argentina Boden 2015s, meanwhile, went to 89.50 from 87.50, a trader said.

At the same time, Latin American corporates were "unable to hold off the onslaught of another U.S. Treasury drubbing," another trader said.

"Prices closed down," he said, but "spreads held close to unchanged and some of the better credits were actually a few basis points tighter."

The new $1 billion 5½% notes due Oct. 23, 2020 from Brazil's Telemar Norte Leste SA - which priced at 99.991 to yield 5½%, or Treasuries plus 283.9 bps - "made a nice early run to trade as high as 101.05, trading frequently and closing at 100.40 bid, 100.65 offer," the trader said.

The new $1.75 billion of notes due 2020 and 2039 from Brazil's Vale Overseas traded "with heavy volume, opening at 197 and trading as tight as 189, then closing there," he said.

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