EM stabilizes during New York session; Buenos Aires, Gol Linhas Aereas pull planned deals

By Paul A. Harris

Portland, Ore., Feb. 16 - Emerging markets bonds got off to a rocky start as the New York session got underway, according to a trader there.

As has become customary, the headwinds blew from Europe, where widening took place as the market continues to parse the likelihood of a bailout for Greece, and the extent of the possible impacts should that bailout fail to materialize.

Late in the European session the Markit iTraxx Crossover S16 index was 15.5 basis points wider at 645 bps bid.

However, as the New York session advanced, bonds firmed - particularly in the late going - the trader said.

Cash bonds ended basically unchanged on the day, on very thin volumes.

It even appeared that some participants had gotten a healthy jump on the upcoming Presidents Day three-day weekend in the United States, the trader remarked.

Meanwhile in the ultra-quiet primary market, the City of Buenos Aires set mandates ahead of a dollar-denominated offering that is expected to come on a very brief timeline, but then the city withdrew the deal because of the early volatility.

Also Brazil discount air carrier Gol Linhas Aereas Inteligentes SA postponed its dollar-denominated offering.

Henderson tighter overnight

There was evidence that the new Henderson Land MTN Ltd. 4¾% senior notes due Feb. 14, 2017 saw some flipping during the Asian session, the New York trader said.

Nevertheless the deal, which came at a 415 bps spread to Treasuries on Tuesday, traded as tight as 396 bps bid, the source added.

Deutsche Bank, HSBC, JPMorgan, Morgan Stanley and Standard Chartered Bank led the deal for the Hong Kong property developer, which upsized to $400 million from $300 million.

Elsewhere in the secondary market Dolphin Energy Ltd. LLC (Abu Dhabi)'s add-on notes to its 5% notes due Dec. 15, 2021 (A1/A+), which priced last week, continue to maintain a notable premium, according to market sources.

The New York trader saw the new Dolphin paper at 102½ bid, 103 offered. The deal came late last week at 101.25.

The deal is performing well in the secondary market because it came particularly cheap to comparables, and because Middle East issuance has been on the light side, with investors there believed to be very keen to put cash to work.

Meanwhile the speculative grade PT Cikarang Listrindo 6.95% senior notes due Feb. 21, 2019 (Ba2/BB-/) were par ½ bid 101 offered and not moving much, the trader said.

The $500 million issue priced at par on Monday.

Cikarang served the Asian high-yield sector as a pioneer, according to one sellside source, who noted that since the Indonesian power company came back without any arrows in its head, other speculative-grade issuers are likely to appear soon.

Pulled deals

City of Buenos Aires mandated Barclays Capital, BTG Pactual and Citigroup to set up investor meetings ahead of a $415 million offering of bonds.

However, the market's increased volatility related to the ongoing credit crisis in the euro zone on Thursday prompted the issuer to back away from the primary market for the time being, a sellside source said.

Buenos Aires could revive the deal as early as next week, the source added.

Meanwhile Gol Linhas Aereas (B1/BB-/BB-) has withdrawn its $100 million minimum offering of perpetual notes, which had been talked with a yield in the 11½% area on Tuesday.

The deal was being led by JPMorgan.

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