Swift/Friboi to sell $600 million; Shanghai Zendai sets price talk; Venezuela dives on Chavez media attack

By Paul A. Harris and Paul Deckelman

St. Louis, May 29 - The emerging markets forward calendar built out with Latin American deals during Tuesday's session.

Meanwhile in trading Brazil's benchmark 2040 bonds were ¼ point lower.

Venezuela's sovereign paper also traded lower trailing president Hugo Chavez's decision to deny license renewal to Radio Caracas Television, and the ensuing unrest in the country.

Zendai talks $150 million

Among Asian issuers planning to sell new debt, Shanghai Zendai Property Ltd. set price talk for its $150 million offering of five-year senior notes (B2/B+/B+) at the 10% area.

Merrill Lynch & Co. is leading the capital expenditures and working capital deal from the Hong Kong-based property development company.

Swift/Friboi lines up deal

But most of the primary activity on Tuesday came from Latin America.

American beef and pork producer Swift & Co., in conjunction with Brazilian beef exporter, Friboi, was heard to be bringing a two-part $600 million offering of 10-year notes in July.

The bond proceeds will be used as part of the financing for the acquisition of Swift by J&F Participacoes SA, the majority owner of JBS SA, which in turn is the parent of Friboi.

The bonds are backed by bridge financing from Banco do Brazil, Citigroup, Santander, Rothschild and UBS.

According to market sources, Friboi's bonds traded lower on news of the purchase.

Friboi's 9 3/8% notes maturing in 2011 were spotted Tuesday morning at 104 bid, 105 offered, down a point.

Meanwhile Friboi's 10½% notes due 2016 were down 1½ points Tuesday morning at 112 bid, 113 offered.

The source commented that the conference call highlighted some lofty expectations for EBITDA-turnaround at Swift, but also clarified that acquisition was made at holding company level, leaving JBS effectively uninvolved in the transaction.

Ultimately, J&F expects to integrate its two operating companies, Swift and JBS, however the timing was unclear, the source added.

In other Latin American corporate news, Tarjetas Cuyanas SA will market $65 million equivalent of peso-linked five-year notes (B) next week via Barclays Capital and Banco Galicia.

Banco Schahin to bring $100 million

Brazil's Banco Schahin will start a roadshow on Wednesday in Singapore for its $100 million offering of three-year senior unsecured notes (Ba3), coming to market via Merrill Lynch.

The Sao Paulo-based commercial bank will use the proceeds for general corporate purposes.

Hugo's heavy hand

In the secondary market, Venezuela's bonds took a nosedive Tuesday in the wake of violent protests a day earlier in Caracas over strongman Hugo Chavez's controversial move to shut down a popular TV network and replace it with a state-run entity.

The country's 9¼% notes due 2027 were being quoted down ¾ point at 115.5 bid, although another source who saw the bonds at that same level called them down closer to 2 points.

The finish was the lowest in nearly a year.

The bonds' yield, meantime, after having widened out by 7 basis points in morning dealings, kept right on climbing through the afternoon, finally ending some 15 bps wider at 7.72%.

Spreads between the average yield on the country's bonds and comparable U.S. Treasuries, as measured by the JP Morgan EMBI+ index, widened out by 10 bps to 256 bps.

Credit default swaps on Venezuela were about 12 bps wider, at 198 bps - the highest level since early May, when the markets were still reeling from the outspoken leader's threat to pull his country out of the International Monetary Fund - a step that could trigger a technical default on its bonds.

The Venezuelan bonds tumbled and their spread blew out after Monday's clashes between police and anti-government protestors in the streets of the capital city, following Chavez's decision to deny license renewal to Radio Caracas Television, a popular, privately owned media outlet which Chavez charges helped to instigate a failed 2002 coup attempt against him - an accusation the owners deny.

He also said that the widely watched TV network, the country's oldest, was "poisoning" the minds of the public with pro-capitalist programming.

Chavez earlier this year embarked upon a program of turning Venezuela into a full-fledged socialist state - a drive that has included a governmental takeover of key economic assets, including electric power and telephone operations, oil projects and now, apparently, the media.

Chavez, who was granted the power to rule by decree by the country's Congress, says he has the legal right to make such decision - even though thousands of protestors marched in the street, denouncing what they called a move towards "dictatorship" and many foreign governments have urged Chavez not to try to seize control of the media to muzzle his opponents.

Chavez has also embarked upon a similar campaign against another widely watched broadcaster, Globovision, whom he has accused of trying to incite attempts against his life. Globovision's owners have denied the allegations.

Ecuador in the oilpan

Besides the political turmoil surrounding the fiery president's latest moves, Venezuelan debt, and that of such other oil-exporting countries as Ecuador, was negatively impacted by a nearly 3% fall in prices of crude oil, a lucrative export commodity for both countries.

Ecuador's bonds were seen off some three-quarters of a percentage point on the EMBI index, its spread over Treasuries 3 bps wider at 625 bps.

Elsewhere in the region, Mexico's peso-denominated bonds were firmer, with the yields on both its 2015 and 2024 bonds coming in by 5 bps to end at 7.58%.

Mexico's dollar-denominated global bonds were also firmer, with the yield on its 6 5/8% notes due 2015 seen 1 bp tighter at 5.41%.

Yields declined and prices rose accordingly after the country's central bank left its key overnight lending rate at 7¼%, rather than raising that rate for a second straight month. However, the bank's accompanying announcement seemed to imply a continued tightening bias.

Brazil's benchmark 11% notes due 2040 were seen down ¼ point at 134.125.

Asian action

In Asian-issuer dealings, a New York-based trader said that he had not seen the new two-year floaters from Export-Import Bank of Korea, although he said that overall, "there was not a lot of client activity" in anything.

In local-market activity, the Philippines' benchmark 2031 bonds were seen at 113.75 bid, 113.875 offered and its 2032 bonds were at 97.625 bid, 97.875 offered, both down ¼ point.

Overall, the EMBI+ index was seen having tightened by 1 bp to 151 bps, a little above its all-time tight level at 149 bps.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.