Petrobras perks up market with $4 billion; TAM prices $300 million; Hyundai Capital roadshows

By Christine Van Dusen and Paul A. Harris

Atlanta, Oct. 23 - One big new deal pricing popped up Friday to perk up the market, even as flows into emerging markets bond funds fell from the previous week's record-setting highs and the number of new deals was thin.

Brazil's Petrobras priced a benchmark-sized offering of dollar-denominated notes in 10- and 30-year tranches, with $2.5 billion due January 2020 to yield 5.875% and $1.5 billion due January 2040 to yield 7%.

Also from Brazil on Friday, airline company TAM SA priced $300 million of 9½% 10-year notes to yield 9¾%, according to a market source.

Among upcoming deals Hong Kong-based Bank of East Asia Ltd. plans to offer step-up subordinated notes due 2059 and preference shares with UBS AG and Deutsche Bank AG, Singapore Branch as joint bookrunners.

Korea's Hyundai Capital Services has mandated bookrunners for a bond issue and is planning a roadshow to begin Oct. 26 and travel through Asia, Europe and the United States.

Overall, flows into emerging markets bond funds fell from the previous week's record-setting highs but still took in a "respectable" $492 million, according to research firm EPFR Global, as the previous week's inflows increased demand among investors.

"It's really just been all about how the market's digesting the supply," a market source said.

Petrobras 'remarkable'

The Petrobras deal was viewed as noteworthy not only for its size but that it priced just after Brazil passed a new law that would tax inward investment into the country's stocks and bonds as a means to slow the appreciation of the country's currency.

"I think Petrobras is very important," said Enrique Alvarez, a debt strategist at think tank IDEAglobal. "The size of the issue will tell you something about how the risk parameters and appetite have changed for Brazil after we've seen the somewhat less market-friendly tax."

What's also "remarkable," he said, is that Petrobras can float a combined $4 billion issue in notes that are due 2020 and 2040 when the larger benchmark on the Brazil sovereign 2040 only has $4 billion of current flow.

"So it's very noteworthy and says a lot about the risk appetite for quasi-sovereign paper," he said.

The deal (Baa1/BBB-/BBB) came through its Petrobras International Finance Co. subsidiary.

Petrobras sold $2.5 billion of 5.75% notes due January 2020 to yield 5.875% at a spread of 238.5 bps to Treasuries and $1.5 billion of 6.875% notes due January 2040 to yield 7% at a spread of 270.6 bps to Treasuries.

Citigroup, HSBC, JP Morgan and Santander are the joint bookrunners for the Securities and Exchange Commission registered deal.

Proceeds will be used to repay borrowings under lines of credit used to finance capital expenditures. Any remaining funds will go to general corporate purposes.

Petrobras is an energy company based in Rio de Janeiro, Brazil.

TAM prices $300 million

Also from Brazil, airline TAM priced $300 million of 9½% 10-year senior notes at 98.43 to yield 9¾%, according to an informed market source.

Pricing matched talk for a yield in the 9¾% area.

The bookrunners for the Rule 144A and Regulation S deal are Citibank and Banco Santander.

The bonds, due January 2020 and non-callable for five years, were issued through TAM Capital 2 Inc. and guaranteed by parent companies TAM SA and TAM Linhas Aereas SA.

Proceeds will be used for general corporate purposes.

TAM is an airline company based in Sao Paulo, Brazil.

Hyundai Capital plans roadshow

Hyundai Capital Services has mandated Citigroup, Deutsche Bank, Goldman Sachs, JP Morgan, Morgan Stanley and Royal Bank of Scotland for a bond issue and roadshow, according to a market source.

The roadshow is set to begin Oct. 26 and travel through Asia, Europe and the United States.

Hyundai is a provider of auto financing and other consumer products, based in South Korea.

Bank of East Asia plans step-up subordinated notes due 2059

Hong Kong's Bank of East Asia Ltd. said it is planning an offering of step-up subordinated notes due 2059 and preference shares.

UBS AG and Deutsche Bank AG, Singapore Branch are joint bookrunners, with UBS on the left. The securities will be sold under Regulation S.

The offering of hybrid tier 1 capital instruments will be packaged as a unit of notes and non-cumulative preference shares to be sold by Innovate Holdings Ltd. The two components will not be able to be separated.

Bank of East Asia's notes will pay a fixed rate for 10 years, then step up to a floating rate.

Bank of East Asia is a Hong Kong-based retail and investment bank.

Net Servicos directors approve $350 million

The board of directors for Brazil's Net Servicos de Comunicacao SA has approved selling up to $350 million of bonds, indicating the deal could be upsized, according to a market source.

The bookrunners are Citigroup, ING Groep NV and Banco Itau.

The bonds are non-callable for five years.

Proceeds will be used for general business purposes.

Net Servicos de Comunicacao is a cable services provider based in Sao Paulo, Brazil.

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