Emerging market debt hurt by Argentina, Venezuela; EGE Haina to hit the road

By Reshmi Basu and Paul Deckelman

New York, April 13 - Emerging market retreated Friday as both Argentina and Venezuela sold off on the long end of their curves.

In the primary market, Dominican Republic's EGE Haina Finance Co. (/B/B-) plans to start a roadshow for a $150 million offering of 10-year senior notes in London on Monday.

Following London, the roadshow will move to New York on Tuesday, April 17, and then off to Boston on Wednesday, April 18.

Barclays Capital and Deutsche Bank are the lead managers for the Rule 144A and Regulation S transaction.

EGE Haina Finance Co. is a wholly owned and guaranteed subsidiary of Empresa Generadora de Electricidad Haina, SA, a thermoelectric generator in the Dominican Republic.

Coming from Mexico, Desarrolladora Metropolitana SA de CV plans to start investor presentations for an inaugural offering of dollar-denominated 10-year senior notes (B2).

The Asian and European leg of the roadshow will start in Singapore on Thursday, April 19, then off to Hong Kong on Friday, April 20, next London on Monday, April 23, followed by Vienna and Frankfurt on Tuesday, April 24 and finally Geneva and Zurich on Wednesday, April 25.

The U.S. leg will begin in New York on Thursday, April 26 and will wrap up in Boston on Friday, April 27.

Dresdner Kleinwort is the bookrunner for the Rule 144A and Regulation S transaction.

The deal is non-callable for five years.

The Mexico City-based issuer is involved in home building and construction.

Venezuela, Argentina hammered

Emerging market debt retreated Friday, as the long maturities of Venezuela and Argentina were hammered. On Thursday, both credits came under pressure on rumors that a big appetite bigwig from London was leaving a large bank, according to a market source.

Published reports said that some investors were voting with their feet and bailing out of Venezuela's sovereign issues, and Argentina's as well, on fears that ABN AMRO Asset Management - a major holder of both bonds - might rebalance its portfolio in the wake of an executive shakeup this past week that saw Rafael Kassin resign as manager of the company's $3.5 billion global emerging debt portfolio, to be replaced by the team of CEO Paul Abberley and senior portfolio manager Alan Bridges.

The unwinding of both credits continued into Friday's session as risk aversion cranked higher. During the session, the Argentinean discount bond due 2022 gave up 2.25 to 110.80 bid, 111.25 offered. The country's par step-up bond due 2038 eased 1.75 to 48.90 bid, 49.50 offered.

Meanwhile the Venezuelan bond due 2027 shed 1.55 to 122 bid, 122.40 offered. The bond due 2034 was lower by 1.25 to 124.50 bid, 125.50 offered.

EM quiet

Overall the market was characterized as "dead," by a trader in Latin American debt, adding that at his particular large shop, at least, "nothing of note" was really going on.

"Nothing happens in the external debt of emerging markets anymore."

The trader said, for instance, that there were no fresh prices on the new Province of Buenos Aires 9.63% bonds due 2028, $400 million of which were sold earlier in the week; the last price noted, 100.75 bid to 101 offered, had been seen at lunchtime - that is, lunchtime on Thursday, the trader said. Likewise, there was nothing seen in secondary of the new Bonar X dollar-denominated bonds sold in the local market on Thursday, "not anything at all."

PDVSA a tad off

The recently priced bonds of Petroleos de Venezuela, the Venezuelan state oil company, "are trading - but there's nothing special going on with them. They're all just finding a level as locals start to sell, but I don't think we saw any really big news in them today [Friday]."

The PDVSA bonds "were generally trading at 61 to 73 [basis points] in back of the sovereign" government bonds, "which is sort of where people expected them to trade."

Another source quoted the PDVSA 5¼% bonds due 2017 yielding some 70 bps over the comparable Venezuelan government issue, although that was said to be about 7 bps wider than Thursday's levels. The bonds' price was seen retreating while the yield and the spread against the sovereigns rose, as local investors sold the bonds to reap cash dollars. The bonds' prices were off 0.45 to end at 83.35, while their yield widened to 7.67%.

In Brazilian debt, the first trader meantime saw its benchmark 2040 bonds at 134.85-134.90, "essentially unchanged. The Brazil '40s have basically been in the same price range now for months, and months, and months. They must be the most stable asset on the planet."

Overall in the emerging markets, the widely followed EMBI+ index put out by JP Morgan Chase hovered around a spread of 162 bps, near the all-time low mark it hit earlier in the week.

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