Dominican Republic mandates Barclays, Citigroup; quality assets follow Treasuries lower

By Paul A. Harris

St. Louis, Oct. 9 - The EMBI-Plus index tightened by 13 basis points on Friday to 291 bps bid, according to a market source.

However higher quality emerging markets bonds, some of which have lately been seen at or near historic highs, softened on Friday, according to Enrique Alvarez, head of research, Latin America, for IDEAglobal.

That softness was partly attributable to profit-taking, Alvarez said.

However it took place against a the backdrop of Treasuries that had weakened as a result of Fed chairman Ben Bernanke's comment in an interview that the Fed stands ready to tighten monetary policy when the economy improves.

"In general the risk-appetite trade continues to be very much on the table," the strategist said.

"However, the new element is the sharp rise in Treasuries, which is a consequence of the Bernanke interview on Thursday.

"That's driving things back a little bit - dissipating what had been a very bullish trend."

Brazil's 8¼% global bonds due 2034, which hit an all-time price high of 135 bid on Thursday, were at 130 bid, 136 offered on Friday, Alvarez said.

"That's characteristic of the holiday bid-offer spread taking over," he explained, referring to the three day Columbus Day holiday weekend in the United States.

"You really can't tell which way they are going," he added.

Dominican Republic mandate

In the primary on Friday the Dominican Republic mandated Barclays Capital and Citigroup to lead a pending offering of dollar-denominated global sovereign bonds, according to market sources.

The deal is expected to be benchmark-sized. However the size, structure and timing remain to be determined, sources say.

Meanwhile Turkey's BankPozitif Kredi ve Kalkinma Bankasi AS mandated J.P. Morgan Securities Ltd., The Royal Bank of Scotland plc, and Standard Bank plc to arrange a series of investor meetings in Europe and in Israel, starting on Wednesday, according to a market source.

BankPozitif, which is rated at BB by Fitch, is approximately 70%-owned by Israel's Bank Hapoalim BM.

The week ahead

In addition to the deals from the Dominican Republic and BankPozitik, the primary market has several other offerings that promise an active week ahead.

From Latin America, Brazil's Odebrecht Finance Ltd. (Construtora Norberto Odebrecht SA) mandated HSBC, Banco Santander and BB Securities Ltd. as lead managers for its benchmark-sized offering of dollar-denominated 10-year notes (expected ratings /BB/BB+).

Pricing of the Rule 144A/Regulation S deal is subject to market conditions, and will be preceded by investor presentations in Europe and the United States.

Odebrecht was one of a pair of corporate deals with sub-investment grade credit ratings to roll out on Thursday.

Meanwhile Banco do Brasil, Latin America's largest bank, began a roadshow on Thursday for its dollar-denominated offering of fixed-rate subordinated tier 1 perpetual notes (expected Baa2), according to market sources.

The roadshow moved to Hong Kong on Friday, then continues in London on Tuesday and New York on Wednesday.

The Rule 144A/Regulation S deal is expected to price in the coming week, pending market conditions.

Citigroup, JP Morgan and BB Securities are joint bookrunners.

The notes will feature a call provision which triggers a coupon step-up.

State-controlled Banco do Brasil is headquartered in Brasilia.

Asian deals

From the world of Asian high-yield corporate paper, Indonesia's PT Adaro Energy Tbk./PT Adaro Indonesia began a roadshow for its benchmark-sized dollar-denominated 10-year senior guaranteed notes (Ba1//BB+).

The roadshow wraps up Thursday in Boston.

Credit Suisse, Deutsche Bank Securities and UBS AG are joint bookrunners for the Rule 144A and Regulation S sale, which will be issued through PT Adaro Indonesia and guaranteed by PT Adaro Energy. OCBC Bank is a joint lead manager.

Proceeds will be used for capital expenditures and for general corporate purposes.

The prospective issuer is a Jakarta, Indonesia, coal mining company.

Elsewhere in Asian high-yield corporates, China's Lumena Resources Corp. started a roadshow for its dollar-denominated offering of global senior notes (B1/BB-).

The roadshow wraps up on Wednesday.

BOC International, Credit Suisse and Deutsche Bank Securities Inc. are joint bookrunners for the debt refinancing, capital expenditures and general corporate purposes deal from the thenardite mining firm.

Korea Expressway to bring benchmark

Meanwhile on the quality end of the credit spectrum, Korea Expressway Corp. started a roadshow on Thursday for its benchmark-sized dollar-denominated offering of global medium-term notes (A2).

The deal is expected to price in the early to middle part of the coming week, following a brief roadshow that will include Europe and New York.

Bank of America Merrill Lynch, Deutsche Bank, HSBC and Korea Development Bank are managing the general corporate purposes deal.

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