Turkey leads primary flood with $1.25 billion deal; ICICI plans $2 billion; secondary holds steady

By Aaron Hochman-Zimmerman

New York, Sept. 26 - The emerging markets primary learned how to walk and run all in one day.

Secondary trading was fairly light, but new deals from corporates and sovereigns flooded out of the pipeline. Over $2 billion priced during the session.

Turkey led the way with a $1.25 billion transaction, which left a $750 million sovereign from Ghana as the largest still left on the calendar. ICICI Bank Ltd. is offering the biggest corporate deal on the calendar at $2 billion.

Many felt that Mexico opened the primary faucet when it priced $1 billion in a pair of add-ons Tuesday.

Even ahead of the data releases scheduled for this Thursday, which will include the final second quarter GDP figures from the United States, the Mexican success left optimism and confidence in the market.

"[The] massive equity rally and increase in consumer confidence has companies that had attempted to bring deals now eager to seize the opening in the financing window," said a trader who specializes in Latin American corporates.

By stark contrast "EM trading was unchanged," a trader said who conceded that there was "a positive tone," but nothing that matched the fervor in the primary.

Market volatility descended further from the stratosphere of this summer. The generally accepted measure of volatility, the VIX index, dropped 0.97 to finish the day at 17.63.

Led by the primary, the day was very positive, but some are still predicting that a recession will strike in the United States in 2008, a market source said.

Still, as a sector, emerging markets felt a sense of hope as deals which were long backlogged in the pipeline found fertile soil during Wednesday's session.

Floodgates open in primary

Sovereign new issues led the charge initially, but were followed to market by corporates.

Turkey, not to be outdone by Mexico, priced the day's biggest issue, and Ghana released talk for its $750 million issue.

Earlier in the week, much speculation had swirled through emerging markets over a possible new issue from Turkey, which finally priced $1.25 billion of 10-year 6¾% bonds (Ba3/BB-/BB-) at 99.26 to yield 6.85%, or 221.6 basis points over Treasuries. The yield was in line with guidance of 6.85%.

Citigroup and HSBC handled the books for the registered deal.

Proceeds from the sale will be used for general financing and the repayment of debt.

Meanwhile, Ghana announced talk of 8.5% to 8.75% for its 10-year bullet (B+/B+) worth up to $750 million.

Citigroup and UBS have the books for the deal.

Pricing is expected Thursday morning.

"[The] big thing I'm watching is the Ghana deal," said an emerging markets analyst, who added: "Looks like it's going to fly off the shelves."

"Price looks right, nice size so it should be reasonably liquid, and there's a pretty broad demand base for it. If it does get done as successfully as it now looks, I think this will be a big shot in the arm for the market," he said.

"Talk is there's some chance for an upsize, but I think the best thing for them would be to keep the size unchanged and just let the oversubscription number go higher to keep it well bid post-issue," he added.

Corporates follow after

Sovereigns had been the first to come back to market after the recent struggle with the credit crunch, but corporates soon found the courage to enter the arena.

Colombia's Transportadora de Gas del Interior SA ESP priced $750 million of 10-year senior unsecured notes (BB/BB) at par to yield 9½%.

The deal priced in line with its talk for a yield in the 9½% area.

ABN Amro brought the deal to market.

The notes feature five years of call protection.

Proceeds from the sale will be used to refinance existing debt.

Bogota, Colombia-based TGI owns and operates the largest gas pipeline in Colombia.

In trading, TGI closed the day at 100.65 bid, 100.95 offered.

Mexico's Grupo Senda Autotransporte SA priced a $150 million eight-year offer (B+/B+) at par to yield 10½%, according to a market source.

Credit Suisse was the bookrunner for the deal.

The bonds are noncallable for four years.

Proceeds will be used to refinance existing debt.

Senda is a Monterrey, Mexico-based passenger bus and cargo line.

ICICI talks $2 billion

India's ICICI Bank issued talk of Treasuries plus 237.5 basis points for its planned sale of $2 billion in five-year senior unsecured bonds (Baa2//BBB).

Deutsche Bank, Goldman Sachs and Merrill Lynch are the bookrunners for the deal.

ICICI Bank is a Mumbai, India-based retail lender.

Mexico's Corporacion Durango SAB de CV announced plans to offer $520 million of 10-year senior unsecured notes (B+/B+).

Pricing is expected this week and Merrill Lynch will have the books.

The bonds are noncallable for five years.

Proceeds from the sale will be used to refinance existing debt and for general corporate purposes.

On July 25 Durango pulled a similar two-tranche offer.

Durango is a Durango, Mexico-based bag and box manufacturer.

Local deals made progress during the primary free-for-all.

Two Israeli deals priced along with the announcement of a debut local offering of 400 billion pesos from Colombia's Bancolombia SA.

It will be the first issue from a 1.5 trillion peso program.

Bancolombia is a Medellin, Colombia-based lender and savings bank.

Europe stronger, led by Turkish sovereigns

In the secondary, Turkey's benchmark issue due 2030 traded up approximately 0.25 to 115.29.

Corporates in emerging Europe have enjoyed some sunshine over the past two weeks, according to a market source.

In that time the big names like Gazprom, VTB, and Sberbank have tightened, the source said.

The smaller players have lagged behind. Banks in Russia and Kazakhstan which rely on funding from external sources have been underachieving compared to the larger market, the source added.

Elsewhere, the Russian benchmark finished the day lower at 112.04.

LatAm looking up on back of primary

In Latin American trading, the sentiment was generally good, although issuers like Venezuela and Colombia were seen wider, according to one trader.

Argentina had a positive day with its high-beta 8.28% sovereigns due 2033 finishing at bid 92.0, 92.5 offered, but the country's corporates are really the issues to watch, according to a market source.

Argentine corporates have been the star performers in Latin America, the source said.

The Transener notes due 2017, the Transportadora de Gas del Sur notes also due 2017, and issues from Hidroelectrica Piedra del Aguilas have all tightened significantly, the source said.

In Venezuela, PDVSA has been given a lot of positive attention from investors as the price of oil continues to remain above $80 per barrel.

The source expects PDVSA to strengthen further as oil prices show no signs of falling off.

The Mexican government bonds due 2034 fell off just 0.05 to 108.70.

Brazil's closely followed 11% bonds due 2040 were unchanged on the day and closed at 133.65 bid, 133.70 offered.

Asia deals with inflation woes

Asia has faced inflation concerns in recent weeks, but issues have handled themselves well especially with the help of the 50 basis point rate cut from the Federal Reserve Bank, according to a market source.

Oil prices remain high, and many investors are turning towards coal in Asia.

PT Adaro Indonesia's 8.5% senior secured bonds maturing in 2010 and PT Berau Coal's issues due 2011 will remain attractive even as volatility finds its way up, a market source said.

In the Philippines worries that the central bank may not cut interest rates left the country's benchmark government bonds due 2030 lower at 131.75.

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