Emerging market debt higher on equities rally; Clisa sets initial talk

By Reshmi Basu and Paul Deckelman

New York, April 16 - Emerging market debt gained more ground Monday as U.S. equity markets rallied on the back of a government report that showed better than expected U.S. retail sales for the month of March.

In the primary market, two issuers set guidance for deals set to price this week. Argentina's Compañía Latinoamericana de Infraestructura & Servicios SA (Clisa) set indicative price guidance for an offering of $100 million in five-year bullet bonds (B-) at 10% to 10½%.

The issue will be guaranteed by Clisa's subsidiaries, Benito Roggio e Hijos SA and Cliba Ingenieria Ambiental SA.

BCP Securities is the manager for the Rule 144A transaction.

The Buenos Aires-based issuer is a holding company involved passenger transport, construction, road maintenance and environmental engineering.

Moving to Korea, GS Caltex Corp. set initial price guidance for a dollar-denominated offering of 10-year bonds (Baa1) in the area of Treasuries plus 100 basis points.

Barclays Capital, Deutsche Bank, Citigroup, and Goldman Sachs are managers for the Regulation S transaction.

The Seoul, Korea-based issuer, formerly known as LG Caltex, is an oil refining company.

Meanwhile the primary market saw more life Monday as several issuers are set to hit the road this week.

Coming from Latin America, Banco Mercantil do Brasil (B1/B) plans to kick off investor presentations this week for a dollar-denominated offering of five-year amortizing notes.

Presentations are scheduled to begin in Singapore on Wednesday, April 18, then Madrid and Lisbon on Thursday, April 19, next London on Friday, April 20, followed by Vienna and Frankfurt on the following Monday, April 23, and then wrapping up in Geneva and Zurich on Tuesday, April 24.

The notes will amortize in the third, fourth and fifth year.

Dresdner Kleinwort is the lead manager for the Regulation S transaction.

Elsewhere, Moscow-based Transcapitalbank (B1) plans to sell an inaugural offering of dollar-denominated three-year senior unsecured eurobonds.

The Asian leg of the roadshow is expected to take place from April 19 through April 20. The European leg will run from April 23 through April 25.

ABN Amro and Deutsche Bank are joint bookrunners for the Regulation S transaction

From Kazakhstan, JSC Halyk Bank plans to sell a benchmark-sized offering of dollar-denominated senior notes (Baa1/BB+/BB+).

The deal will carry a tenor of seven to 10 years.

A roadshow is expected to start on Wednesday, April 19, and maked stops in London, Geneva, Frankfurt, New York and Boston.

Citigroup and Dresdner Kleinwort are lead managers for the Rule 144A and Regulation S deal, which will be issued via HSBK (Europe) BV.

EM firm ahead of CPI

Returning to trading, emerging market debt remained well supported Monday as the market awaited Tuesday's release of the U.S. consumer price index.

Ecuador's benchmark 10% bonds due 2030 were seen little changed Monday, quoted at around 91.25 bid, 92 offered and yielding 6.02%. The market took in stride the expected solid victory by president Rafael Correa in the weekend referendum on convening a national assembly to rewrite that country's constitution.

"I didn't see a [Ecuadorian] bond trade today [Monday]," a New York-based trader in Latin American debt declared. "They're close to where they were on Friday, and the activity level, as far as I could tell, was minimal. Prices look like they're trying to reflect unchanged."

Some 82% of Ecuador's electorate voted in favor of the idea, which Correa said is needed to break the power of the country's congress, which he has described as obstructionist in attempting to thwart governmental reforms he has proposed. The assembly could be convened as soon as September.

While Correa has campaigned against the power of Ecuador's traditional elites, his opponents say Correa is trying to follow the lead of his friend and political mentor, Venezuelan strongman Hugo Chavez, in centralizing governmental power in the presidency. Chavez's allies in the Venezuelan congress recently granted him the power to rule the country by decree, without obtaining prior congressional consent for major actions.

Ecuador's bonds have gyrated wildly since last November, when the left-wing populist Correa was elected president, in part by campaigning against the country's more than $11 billion of foreign debt, which he termed corrupt and illegitimate. The bonds fell as low as 67 in December when Correa and his economy minister, Ricardo Patino, indicated that Ecuador might follow the lead of Argentina, which defaulted on some $100 billion of foreign debt earlier in the decade and then essentially forced bondholders to accept new bonds carrying longer maturities and considerably lower nominal values.

However, the bonds began to move strongly back upward in February, when Patino sought to reassure investors that he would rather have a friendly, consensual restructuring of a major portion of the debt rather than a confrontational cramdown. On the strength of their gains since then, with dollar prices now seen in the lower 90s, Ecuador's bonds have thus been the strongest performing EM issue so far this year, up some 26%.

EM tad firmer

Overall, the trader said, "prices were probably a little bit higher. Spreads were unchanged because of the [U.S.] Treasuries rally. Overall, the sentiment in our market seems to be somewhat OK, the way it's been for the past three weeks."

He said that prices for Argentina's debt "did open up higher at one point this morning, but crept back [downward] to [end] only slightly higher on the day."

The widely followed JP Morgan EMBI+ index measuring average emerging market yields versus Treasuries was seen unchanged at 160 bps over.

PDVSA's new bonds higher

Petroleos de Venezuela SA's recently issued bonds were seen higher, pushed up by brisk international demand for the state-run oil company's paper. The 5¼% notes due 2017 were 0.40 higher at 83.7, their its yield declined by 7 bps to 7.61%. The spread between the PDVSA bonds and Venezuela's comparable sovereign debt narrowed by 5 bps from Friday's levels to 70 bps.

Among Asian issues, a U.S. high-yield trader saw MagnaChip Semiconductor Ltd.'s 8% notes due 2014 "collapse" to end at 55 bid, 56 offered, down 4 points on the session. He said there was no news out on the Seoul, South Korea-based computer chip maker, whose next quarterly numbers aren't due for nearly two weeks.

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