Emerging markets see profit-taking; Berau Coal conducts investor meetings; Afren sets talk

By Aleesia Forni and Paul A. Harris

Columbus, Ohio, Feb. 29 - Emerging markets saw a bit of profit-taking on Wednesday; however, cash bonds were mostly unchanged on the day, a trader said.

In Latin American synthetics, Argentina credit-default swaps widened by 15 basis points to 833 bps bid, according to Markit. Brazil CDS ended the New York session 2 bps wider at 140 bps bid. Mexico was unchanged at 135 bps bid.

Romania's 6¾% bonds due 2022 were up about half a point at 102 5/8 bid, 103 1/8 offered, according to a London-based trader.

Romania's $750 million add-on was up nearly half a point since it priced at 102.166 on Tuesday.

Meanwhile the Czech Republic's recently minted euro-denominated 3 7/8% notes due in 2022 continued to lag in the secondary market.

Argentina saw its sovereign bonds ease on news of tensions between the government and YPF SA, Argentina's biggest energy company.

Argentine president Cristina Fernandez de Kirchner criticized YPF for not investing enough money in Argentina, and there is some anticipation that the president may actually refer to YPF during her upcoming State of the Union address.

Elsewhere, Venezuela's benchmark dollar-denominated 9¼% bonds maturing in 2027 ended the Wednesday session down a point at 89½ bid, 90 offered, the trader said.

However Venezuela has been 2012's robust performer in the emerging markets high-yield space, as players who have been underweight in the name in the past few seasons scramble to get back to market weight in anticipation that Venezuelan president Hugo Chavez, who is undergoing his third surgery for prostate cancer, will be unable to stand re-election in October.

Global investors have made no secret of their desire to see the leftist leader out of the picture.

Venezuela's 2027 paper began the year at 72½ bid, the trader recounted. On Wednesday it traded at 91 bid before it eased along with the rest of the market.

Spiking crude oil prices have also lent propulsion to Venezuelan bonds, the trader said.

Meanwhile in the primary market, Afren plc set price talk, while Indonesia's Berau Coal Energy Tbk. PT began investor meetings.

Afren sets price talk

Afren talked its $300 million to $350 offering of seven-year notes (/B/B) with a 10½% to 10¾% yield on Wednesday.

BNP Paribas, Deutsche Bank AG and Goldman Sachs International are the bookrunners.

The deal has been well received by emerging markets investors, according to a trader based in New York, who added that although it won't price until Thursday, the bonds are up a point already in the gray market.

Afren's existing bonds have been trading with a yield of about 10%, and its share price has been up as much as 60 points since the beginning of the year, the trader said.

The deal, which had been expected to garner just a modicum of interest among real-money accounts, gained momentum last week while on a roadshow in London, when real-money accounts began expressing enthusiasm, the trader said.

Afren's existing bonds, the 11½% senior secured notes due February 2016, are 2½ points higher over the past two weeks, the trader said.

Based in London, Afren conducts its oil and gas exploration, development and production operations in African countries, including Nigeria, Gabon, Republic of the Congo, Ivory Coast and Ghana.

The preponderance of interest in the deal has come from emerging markets accounts, sources say.

Berau Coal sets meetings

Berau Coal began investor meetings on Wednesday ahead of a planned offering of dollar-denominated five-year senior notes (B1), according to a New York-based trader.

Meetings are scheduled to take place in Asia, Europe and the United States.

Bank of America Merrill Lynch and Credit Suisse are the leads.

The notes come with three years of call protection.

The coal producer is based in Jakarta.

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