Issuers eye U.S. jobs data; ENAP prices notes; Investors hungry for Latin American deals

By Christine Van Dusen

Atlanta, Aug. 5 - Emerging markets were mostly hushed on Thursday as issuers held off on new deals and investors held their breath in advance of Friday's report on July employment in the United States - a report that could ignite a blaze of new issuance or shut down deal flow until after the summer slowdown.

"It's fairly quiet," a New York-based market source said.

The market is in "a transition phase," said Enrique Alvarez, debt strategist with think tank IDEAglobal. "We've had a very large increase in risk tolerance and in overall demand, for Latin American assets particularly, on the fixed income side throughout the week. I think this is the first respite that the market has taken. It's a function of doubts related to where we will be with the non-farm payroll numbers in the U.S. tomorrow."

Issuers would be a bit crazy to bring deals to market before the data comes out, a market source said. "If I were the issuer I would wait. A bad report might push Treasuries from 290 to 285 or 280. That's very significant."

ENAP prices notes

Still, one issuer did manage to sneak in a deal on Thursday. Chile-based oil and gas company La Empresa Nacional del Petroleo (ENAP) priced $500 million 5¼% notes due 2020 at 99.593 to yield 5.303%, or Treasuries plus 240 basis points, according to an informed market source.

Bank of America Merrill Lynch, Banco Bilbao Vizcaya Argentaria, BNP Paribas and Scotia Capital were the bookrunners for the Rule 144A and Regulation S deal. Proceeds will be used to refinance short-term debt.

Cordoba, with notes totaling as much as $350 million via Citigroup and UBS, could be the next issuer from Latin America to bring a deal. Buenos Aires is expected to follow in September.

"It would be interesting if Cordoba takes the initiative," Alvarez said. "I would suspect that at some point we'll see the rumor mill saying that Argentina will be back in the market very soon."

Said the New York-based market source: "I expect to see something next week out of Latin America, though that's not public yet. But I think things will slow down pretty quickly as we move into the deeper part of August."

What Latin America is concentrating on right now is "the need for yield," Alvarez said. "That's the hunt that has been on, with a much more defined tone over the course of the last week."

Big appetite for LatAm

Latin American names continue to attract inflows into the emerging market asset class, he said. Investors are "lured by higher-than-average returns from the high-beta names."

The appetite has been "overwhelming for Latin America," he said.

He pointed to the recent 4 7/8% bonds due 2021 from Brazil, which were tapped twice in July to bring the total issue size to $1.61 billion.

That deal was "massively oversubscribed," he said.

Also generating a lot of interest was Chile's $1.5 billion equivalent of dollar- and Chilean peso-denominated notes due 2020, including $1 billion 3 7/8% bonds priced at 99.877 to yield 3.89%, or Treasuries plus 90 bps, and Chilean peso-denominated bonds worth $520 million that priced at par to yield 5½%.

"Any sovereign issuer in the region will clearly understand there is ample demand out there," Alvarez said. "It's still an issuer's market, from my perspective."

U.S. data mixed

So far this summer, the economic data out of the United States has been mostly mixed.

"We've been back and forth on the price-driving front, where some U.S. numbers have been more positive than expected," Alvarez said. "But then some others on the manufacturing front have been soft."

Friday's report is expected to show that the private sector added jobs in July and non-farm payrolls fell again during the month, though not as far as they did in June.

If this is indeed the case, several deals could come to market during the next week or so. On that list is Philippines-based toll operator Coastal Road Corp.'s planned $175 million issue of bonds via Bank of America Merrill Lynch and Standard Bank.

The market also is waiting for several deals that have been sitting in the pipeline a while, including Shanghai-based women's apparel company E-Land Fashion China Holdings Ltd.'s planned $200 million offering of senior unsecured notes due 2013, Peru-based lender Corporacion Financiera de Desarollo's planned $250 million bonds and Bank of Moscow's Swiss franc-denominated notes via UBS.

"There are a couple of other things slated for next week," a market source said. "We probably have one more week of a window for issuance, and then things will really slow down."

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