Philippines, Jamaica sell upsized sovereigns, Brazil down on interest rate worries

By Reshmi Basu and Paul A. Harris

St. Louis, April 27 - Two sovereign issuers, the Philippines and Jamaica, tapped three outstanding note issues on Tuesday. Both deals came upsized.

Add to that an investment grade deal from Korea Midland Power, and the session turned out a total of $675 million of issuance.

Meanwhile interest rate jitters continued to exert their downward tug on existing Latin paper - particularly Brazil's C bonds.

One market source told Prospect News shortly after Tuesday's session concluded that the highly liquid issue had traded in the 92.75 area throughout the day, down from Monday's 93.5 bid, 94 offered closing.

The source added that approximately one week ago - that is, early in the week of April 19 - the Cs were trading around 94 bid, 94.5 offered.

"Interest rate scare is the only explanation," said the source.

"You have the FOMC decision expected next week. And you have the non-farm payroll data expected next week on Friday. Those events are scaring investors a little."

The official added that Latin debt is "off a little, in general." However, the source added, "Brazil is taking the brunt because the C bonds are the most liquid."

Buy-sider sees Brazil, Turkey debt

Also citing interest rate apprehension, a buy-side source, speaking on background, saw Brazilian debt down earlier in Tuesday's session.

"Brazil is weaker today, anywhere between five-eighths of a point to three points on the less liquid stuff," said the investor.

"It could be just a continuation of what we saw last week," the buy-sider added.

"It's always the same thing. Last year people were wondering what would do worse in a hiking interest rate environment. Theoretically it should be something like Russia or Mexico.

"But it will likely be Brazil and Turkey because everyone wants to get rid of the risky stuff first."

The investor also made note of a "big sell-off" Tuesday in the Turkish lira.

The source said that early on Russian debt was softer, "to make room for Russian corporates."

Philippines, Jamaica tap existing issues

The Republic of Philippines priced an upsized $400 million tap of two of its sovereign issues (Ba2/BB/BB) on Tuesday.

A $200 million add-on to its 8 3/8% notes due Feb. 15, 2011 priced at 100.964, resulting in an 8.184% yield, with a spread to Treasuries of 375 basis points.

Meanwhile a $200 million add-on to its 8¼% notes due Jan. 15, 2014 priced at 98.454, resulting in a yield of 8.484%, with a spread to Treasuries of 405 basis points.

Deutsche Bank Securities and Morgan Stanley ran the books on the deal that had been upsized from $300 million.

A market source told Prospect News that there were $600 million of orders in the book for the Philippines deal.

Also upsized Tuesday was Jamaica's $125 million add-on to its 10 5/8% sovereign bonds due June 20, 2017 (B1/B). The notes at came to market at 100.5 to yield 10.55%, which was in line with guidance, according to a market source.

Bear Stearns & Co. was the bookrunner on the issue that was upsized from $100 million.

The total amount of Jamaica 2017 paper, after the add-on, comes to $425 million.

Korea Midland brings notes at 125 over

Korea Midland Power sold $150 million of 4.95% seven-year senior unsecured global bonds (A-) at 98.256 on Tuesday to yield 5.251%, or 125 basis points over Treasuries.

That was spot on talk that put the spread at 125 basis points.

Credit Suisse First Boston and JP Morgan ran the books on the Rule 144A/Regulation S issue.

Kaltim, Gazprombank take shape

Details emerged Tuesday on the deal from Indonesia's PT Kaltim Prima Coal.

A roadshow is set to start Thursday in Hong Kong for the company's $375 million two-tranche offering (Ba3/B+).

The show goes to Singapore on April 30, then stops in London and New York on May 4 and finishes off in Boston on May 5.

Kaltim is selling three-year non-call-two floating-rate notes, which will come with a step-up if they are not called.

The Indonesian company will also sell five-year non-call-three fixed-rate notes.

Credit Suisse First Boston and JP Morgan will run the books on the Rule 144A/Regulation S deal.

Elsewhere, Russia's Gazprombank plans to start the roadshow next week for its $500 million 10-year deal (Ba2/B+) via Citigroup and Dresdner Kleinwort Wasserstein.

The roadshow will start on May 3 on the West Coast and in Hong Kong, then travel to Boston and Singapore on May 4, and stop in Philadelphia, New Jersey, Frankfurt and Zurich on May 5, before finishing off in New York and London on May 6.

Finally, in the rumor department, Indonesia's PT Bank Negara has mandated four banks to run a pending offering of $200-$300 million, according to a market source.

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