Emerging markets primary slows; Belarus, Berau price; Chile, Panamericano on roadshows

By Christine Van Dusen

Atlanta, July 26 - With solid economic data from the United States and the afterglow of better-than-expected results from the stress tests performed on European banks, optimism about emerging market debt was tempered on Monday only by the typical summertime sluggishness.

"It's a bit of a sleepy Monday," a New York-based market source said. "The stress tests were a lot of much ado about nothing. It seems like they haven't necessarily impacted the market as of yet, so the beat goes on."

Yields on 10-year Treasuries rose Monday on the news that new home sales in the United States climbed to a better-than-expected 330,000 in June. And the market continued to digest the results of the stress tests, of which only seven of 91 European banks failed.

"We're hearing that a little bit of real money is being put to work," a market source said. "Cash levels seem to have risen, according to the surveys lately."

In general, EM debt is "following equity bullishness," he said.

Greece, Venezuela in focus

Monday saw market-watchers keeping an eye on Greece, which was under review by the European Union and the International Monetary Fund as part of an effort to secure additional bailout funding. This took place against the backdrop of increased tensions over the sovereign's austerity measures.

Greece's five-year credit default swaps on Monday closed at 720 basis points mid, 25 bps tighter, a market source said.

Venezuela also remained in focus after Saturday's remarks by president Hugo Chavez, who said he would block oil exports to the United States if Colombia launched an attack on Venezuela. The two Latin American nations have been at odds since Chavez severed diplomatic ties after Colombia accused Venezuela of harboring guerrilla groups.

Belarus, Berau Capital price

The deals that got the most attention on Monday, particularly from Latin America, "have been out there since last week," a market source said.

New on the scene, though, was a planned issue of 10-year Tier 2 notes from Brazil-based lender Banco BMG.

BCP Securities, Morgan Stanley, Banco Bradesco and Santander are the bookrunners for the deal.

"That's mulling around," he said.

The day also saw the Republic of Belarus bring to market $600 million 8¾% notes due Aug. 3, 2015, priced to yield 9%, according to a market source.

BNP Paribas, Deutsche Bank, RBS and Sberbank were the bookrunners for the Regulation S deal.

The new issue was "well-received," a source said.

The rest of the emerging markets universe is "very active as well," he said.

He pointed to the $100 million add-on to $350 million 12½% notes due 2015 from Indonesia-based coal producer subsidiary Berau Capital Resources Pte. Ltd. The add-on priced Monday at 103.5 to yield 11.546%.

The original notes priced at par to yield 12½%.

Credit Suisse and Deutsche Bank were the bookrunners for the Rule 144A and Regulation S deal, which is non-callable for three years and guaranteed by parent PT Berau Coal Energy and all of its active subsidiary companies.

"It was very successful, at a $1 billion book for a $100 million reopening," the source said. "It's significantly better than when that original deal was done."

Chile, Panamericano on roadshows

Also on Monday, Chile was on a roadshow for its planned offering of $1 billion dollar-denominated notes and $500 million equivalent of Chilean peso-denominated notes due 2020, a market source said.

The notes pay interest and principal in U.S. dollars.

Citigroup, HSBC and JPMorgan are the bookrunners for the Securities and Exchange Commission-registered deal, which could price as soon as next week.

Proceeds will be used for earthquake-related reconstruction efforts.

"They have a fairly big roadshow going on, and that will continue through most of the week," the New York-based market source said. "Most of the speculation is around where they can get a benchmark-sized 10-year deal done. Everyone is discussing what fair value seems like.

"It's such an infrequent, museum-piece issue that I'm sure it will get done better than what people expect. People are focused on it."

Price guidance and other details of the offering are not expected until the Aug. 2 week, he said.

Also on a marketing trip this week is Brazil-based lender Banco Panamericano for an issue of dollar-denominated bonds due 2015, according to a market source.

Bradesco BBI, UBS and Banco Itau are the bookrunners for the deal, which is being whispered to yield about 6%.

Market sources were also whispering about possible notes from Qatar-based lender Doha Bank, perhaps denominated in dollars.

"It's a reasonable bit of activity, considering it's the last week of July," a market source said. "There still a reasonable bit of pipeline that we need to get through."

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