New issuance slowly resumes with Country Garden, Union Bank of India, PSA, Stats ChipPAC

By Christine Van Dusen

Atlanta, Aug. 4 - The new issue pipeline opened again on Wednesday as better-than-expected U.S. economic data pushed Treasury yields up, whetting risk appetite and leading to strong buying in the secondary market.

"It's busy," a Zurich-based trader said. "There are many in the pipeline."

He pointed to the $400 million 4 5/8% notes due 2016 that priced Wednesday from Union Bank of India at 99.846 to yield 4.657%, or Treasuries plus 310 basis points.

The Regulation S-only deal - via bookrunners Barclays Capital, Citigroup, Deutsche Bank, Standard Chartered and UBS - came in line with talk of Treasuries plus 310 bps.

Also pricing on Wednesday was a $600 million issue of five-year senior notes from Singapore semiconductor manufacturer Stats ChipPAC Ltd., which priced at par to yield 7½%.

Credit Suisse and Deutsche Bank Securities were the bookrunners for the Rule 144A and Regulation S deal, which printed at the tight end of the 7½% to 7¾% price talk.

Proceeds will be used to fund a cash distribution to shareholders and to finance the tender offer and consent solicitation for the company's 6¾% senior notes due 2011.

By late afternoon that deal was trading at 102.

Country Garden, PSA price

The day also saw a new deal from Hong Kong-based Country Garden Holdings Co. Ltd. The property developer priced $400 million 10½% notes due 2015 at 99.052 to yield 10¾%, or Treasuries plus 915.4 bps, via Goldman Sachs and JPMorgan in a Regulation S-only deal.

Proceeds will be used to refinance remaining renminbi-denominated, dollar-settled 2½% convertible bonds due 2013 and to fund existing and new property projects.

"That closed at 98.5 on the offer side," a source said.

And Singapore-based port operator PSA International Ptd. Ltd., owned by state investment fund Temasek, priced $500 million 3 7/8% notes due 2020 at 99.684 to yield 3.912%, or Treasuries plus 100 bps. Barclays Capital, Credit Suisse and Goldman Sachs were the bookrunners for the Regulation S-only notes.

Proceeds will be used for general corporate purposes.

Mixed U.S. data

Though primary market activity certainly was more active Wednesday than on Tuesday, when no deals priced, the pace of new issuance was still fairly slow compared to recent weeks.

Sources said the slow pace was due, in part, to the fact that only one of the U.S. economic reports released Wednesday was positive.

While the Institute for Supply Management said that the non-manufacturing purchasing managers' index climbed to a better-than-expected 54.3 in July, a report from Automatic Data Processing showed that private payrolls grew by just 42,000 during the month. Up next is Friday's report on job numbers, which is expected to show a loss of jobs once again.

So it's questionable whether the list of deals that were expected to get done this week - in advance of the summer doldrums that begin in mid-August - will indeed get done before September.

"Let's see if the new issue calendar comes back, what payrolls bring and if markets slow a little on an overbought consolidation trade," a trader said.

ENAP, Cordoba mull deals

Still, some issuers are continuing their march to market.

La Empresa Nacional del Petroleo (ENAP) is continuing its roadshow for a $500 million issue of bonds via Bank of America Merrill Lynch, Banco Bilbao, Vizcaya Argentaria, BNP Paribas and Scotia Capital.

Standard & Poor's recently lowered its rating on ENAP from BBB to BBB- given that the company's "stand-alone credit profile continues to weaken as a result of volatile profitability and cash flow," the ratings agency said in a report. "We still believe there is a 'very high' likelihood of extraordinary support from the Chilean government in the event of financial distress."

Market-watchers also are "waiting for guidance" on the planned bonds from the province of Cordoba, which could total as much as $350 million.

That Argentinean issuer isn't the only one considering a deal. Sources are whispering that Buenos Aires, motivated by low borrowing costs, may be looking to sell bonds in September.

LatAm trades up

In the secondary, emerging market bonds were "back to the theme of chasing yield," a trader said.

Said a California-based buyside source, "It was still a strong day, with buying interest across the board. Higher yielding Argentina and Venezuela are outperforming."

Those names were up about 1 to 1¾ points on the day, along with Petroleos de Venezuela SA.

The Argentina Boden 2015s "are 88.40 bid, the Venezuela 2027s are 75.30 bid and the PDVSA 2027s are 50.00 bid, as benchmarks," the trader said.

Low rates in the United States, along with a positive tone in the equity market and a greater appetite for risk all helped "push bonds higher," the trader said. "The higher-rated credits tightened in by a few basis points on the day as the trend of tighter spreads seems to be the path of least resistance," he said.e

Paul A. Harris contributed to this report

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