Odebrecht sells notes; Investcorp deal ahead; earnings, global economy weigh on EM assets

By Christine Van Dusen

Atlanta, Oct. 23 - Brazil's Odebrecht Finance Ltd. sold notes on a quiet and mostly negative Tuesday for emerging markets assets, as investor sentiment was dinged by disappointing earnings reports, Madrid's delay of a bond issue and continued turmoil for Greece.

"A weakening trend in earnings announcements of late has taken some of the optimism out of global asset markets ahead of a series of central bank rate decisions," according to a report from Barclays.

UPS missed analysts' estimates for third-quarter earnings, and Greece's labor market reforms failed to secure support from the Democratic Left party.

"Risk aversion gained the upper hand as US earnings continued to disappoint," said Gavin Nolan, director of credit research for Markit Group Ltd., in a report. "Peripheral corporates were the main laggards, as is often the way when the market is in free fall."

The Markit iTraxx Europe index spread was 5 basis points wider at 128 bps during the afternoon, the worst daily performance reported in almost a month.

"There was little fresh news around the debt crisis to trigger the sell-off," he said.

The day did see some issuers taking steps toward issuance, with Bahrain-based Investcorp SA setting price talk at the low-8% area for its planned issue of dollar notes.

Bank of America Merrill Lynch, Citigroup, Credit Suisse, ING, JPMorgan and RBS are the bookrunners for the Rule 144A and Regulation S deal.

Pricing is expected to take place on Wednesday.

Turkish lender Turkiye Vakiflar Bankasi TAO (Vakifbank) also set price talk, at the 6 1/8% area for its planned issue of dollar notes, a market source said.

Barclays, Goldman Sachs, ING and Standard Chartered are the bookrunners for the Rule 144A and Regulation S deal.

And roadshows are in the works for Brazil's Samarco Mineracao SA and Russia's Promsvyazbank.

Odebrecht prints notes

In its new deal, Odebrecht Finance priced a $450 million add-on to its 7 1/8% notes due June 26, 2042 at 116.266 to yield 5.95%, or Treasuries plus 299.5 bps, a market source said.

The notes priced tighter than talk, set at 6% to 6.4%.

BB Securities, BNP Paribas, Banco Bradesco and Citigroup were the bookrunners for the Rule 144A and Regulation S transaction.

The original $400 million issue priced in June at 98.479 to yield 7¼%.

The notes are guaranteed by Construtora Norberto Odebrecht SA, an engineering, construction, chemical and petrochemical conglomerate based in Salvador da Bahia, Brazil.

Samarco marketing deal

In other news from Brazil, Samarco Mineracao is planning a roadshow this week for a $1 billion issue of notes due in 2022 a market source said.

Proceeds from the offering will be used to partially fund the company's third pipeline and fourth pelletizing plant project, as well as other investments and for general corporate purposes, according to Fitch Ratings.

Samarco is a Belo Horizonte, Brazil-based mining and iron ore company that is joint-owned by Brazil's Vale SA and BHP Billiton plc.

Promsvyazbank on roadshow

Also on a roadshow this week is Promsvyazbank. The Russian lender set out on Tuesday for a trip to market an issue of eurobonds via Bank of America Merrill Lynch, HSBC, JPMorgan and Promsvyazbank.

The issue will boost tier 2 capital, following the company's postponement of an initial public offering due to weak demand, according to a report from UFS Investment Co.

The roadshow ends Friday.

"We think the new issue should offer a premium of 100 bps to [Home Credit and Finance Bank]'s 2018s and 2020s," UFS said. "Thus, the yield on the issue maturing in five or six years should be 9.6% to 9.7%. On issues maturing in eight years, 10.2% to 10.4% per annum."

Meanwhile, eurobonds from Russia continued to trade with a negative bias, UFS said.

"Selling was due to both declining risk appetite worldwide and oil price fall continuing for already five consecutive days," the report said.

Ukraine spreads widen

In other trading on Tuesday, Ukraine spreads continued to move wider, said Svitlana Rusakova of Dragon Capital.

The long end of the curve has been better offered, she said, "but market players [are] hesitating to lift attractive offers amid a risk-off mood."

The sovereign's 2020s were seen at 103.50 bid, 104.50 offered after recently trading at 104.50 bid, 105.50 offered. Ukraine's 2021s were quoted at 104.75 bid, 105.75 offered after the previous levels of 105.50 bid, 106.50 offered.

Naftogaz bonds were quoted at 102 bid, 102.75 offered. "Some corporate names were also adjusted lower," she said, pointing to Mriya Agro Holdings and Metinvest.

Halkbank 'solid'

Tuesday also saw Turkey-based Halkbank release its third-quarter earnings, which came in above consensus, a London-based analyst said.

"Capital and balance sheet remain robust," she said. "[Halkbank] is comfortable with its liquidity profile and is not looking to issue further eurobonds before late 2013, although it remains committed to building a yield curve going forward it market conditions permit."

For the year to date, Halkbank's performance has been solid, she said.

"We remain constructive on the credit," she said.

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