PDVSA offers $3.15 billion of paper as euro zone worries fade; Emgesa, PCD Stores on tap

By Christine Van Dusen

Atlanta, Jan. 18 - Petroleos de Venezuela SA's plan to issue $3.15 billion of notes in a tap of its 8½% notes due 2017 was the big news of the day for emerging markets debt as investors worried less about the European economic crisis and engaged in some profit-taking.

Several other issuers moved forward with planned deals, including Colombia's Emgesa SA ESP, Dubai's Emaar Properties, China's PCD Stores Group Ltd. and Shui On Land Ltd., and Brazil's Petrobras, Energisa SA, Banco Safra SA and BR Properties.

"It's mixed," a London-based trader said. "This morning was fairly strong, but we've seen some selling. But that's purely due to the Treasury sell-off. The 10-year has lost a half-point from where we were, so there's some selling on the back of that."

Spreads started the day a touch tighter, with the JPMorgan Emerging Markets Bond Index Plus down 2 basis points before finishing Tuesday tighter by 7 bps, with Argentina tighter by 19 bps and Venezuela by 21 bps.

"I think most credits are a little bit tighter, and the comment from our traders is that appetite is relatively strong," a Toronto-based market source said.

PDVSA catches market's eye

Venezuela-based state-owned oil company Petroleos de Venezuela (PDVSA) is planning a $3.15 billion tap of its existing 8½% notes due 2017, a market source said.

The new issue would be part of a plan to issue as much as $6 billion during 2011.

The original issue of $3 billion issue priced at par in September.

"The amount is in the upper range of what we were expecting," according to a report from Barclays Capital.

The market's initial reaction was negative, according to an RBC Capital Markets report, but it was mild and short-lived.

"Easing debt issuance concerns coupled with lofty oil prices quickly attracted buyers back in, in lighter volumes, leaving most bonds 0.75 to one point stronger on the day, with PDVSA's short-end - 2014s, 2015s - and the belly of Venezuela's sovereign curve outperforming," RBC said.

Venezuela's credit default swaps were 18 bps tighter, and cash bonds were the biggest movers of the day, the Toronto-based market source said.

"There's some interest now," he said.

Petrobras, Emgesa plan deals

Also from Latin America, Brazil-based energy company Petroleo Brasileiro SA (Petrobras) is planning a three-tranche offering of dollar-denominated benchmark-sized notes due in five, 10 and 30 years, a market source said.

BTG Pactual, Citigroup, HSBC, Itau, JPMorgan and Santander are the bookrunners for the Securities and Exchange Commission-registered deal, which is expected to price this week.

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

And Colombia-based electricity supplier Emgesa is planning a Colombian peso-denominated issue of 10-year notes that will be payable in dollars, a market source said.

Citigroup and Deutsche Bank are the bookrunners for the Rule 144A and Regulation S offering, which could price as early as Thursday.

Proceeds will be used for general corporate purposes, including financing new projects and repaying existing debt.

Brazilian corporates in focus

In another Latin American deal, Brazil-based developer BR Properties is planning to issue a $50 million tap of its 9% perpetual notes, a market source said.

Credit Suisse and Itau are the bookrunners for the deal.

The original Rule 144A and Regulation S transaction totaled $200 million and priced at par to yield 9%.

Also from Brazil, electricity generator Energisa has mandated Bank of America Merrill Lynch, Morgan Stanley and Santander as the bookrunners for a $200 million issue of perpetual notes (//BB-), a market source said.

Proceeds will be used for general corporate purposes.

And Brazil-based lender Banco Safra plans to issue $500 million of 10-year tier 2 notes, a market source said.

No other details were available Tuesday.

Eskom, VEB whispers

A roadshow is planned by Dubai's Emaar Properties, which has mandated HSBC, Royal Bank of Scotland and Standard Chartered for a potential sukuk offering, according to a market source.

The marketing trip is set to begin Friday.

Also on Tuesday, Eskom Holdings Ltd., South Africa's state-run power utility, whispered its planned issue of between $1 billion and $2 billion of notes at the mid-swaps plus mid- to high-200 bps area, said Jerry Brewin, head of the emerging market debt portfolio at Aviva Investors.

"Remember that the 10-year South Africa bonds trade at the mid-100s," he said. "So the spread of the new Eskom bonds will be roughly 100 bps over the South Africa bond curve."

Barclays Capital, Bank of America Merrill Lynch and JPMorgan are the bookrunners for the Rule 144A and Regulation S deal, which is being marketed on a roadshow.

And Russia-based lender Vnesheconombank whispered its planned issue of CHF 300 million notes due 2016 at the mid-swaps plus 224 bps area, a market source said.

Barclays and BNP Paribas are the bookrunners for the deal, which was marketed on a roadshow from Jan. 12 to Jan. 14.

Chinese issuers advance deals

China-based department store chain operator PCD Stores Group plans to issue fixed-rate renminbi bonds in three- and five-year tranches, according to a company filing.

HSBC is the bookrunner for the deal.

Proceeds will be used for general working capital, to refinance existing debt and to implement expansion strategies.

Also from Asia, Hong Kong-based property developer Shui On Land has mandated Deutsche Bank, Standard Chartered and UBS for an issue of senior notes, according to a company filing.

Proceeds will be used to fund capital expenditures and equipment and for acquisitions, development and construction projects, as well as for the repayment of existing debt.

And Xi'an, China-based West China Cement Ltd. set price talk at the 7 5/8% area for its planned offering of $300 million to $400 million senior notes due 2016, a market source said.

Deutsche Bank and ICBCI Capital are the bookrunners for the Rule 144A and Regulation S offering.

Proceeds will be used to expand a production facility, to repay a bridge loan from ICBC International Finance Ltd. and for general corporate purposes to enhance liquidity.

Belarus, Peru mull notes

In other deal-related news, Belarus is mulling a $500 million offering of seven-year notes, a market source said.

The sovereign had been expected to issue as much as $1 billion of notes before the end of 2010.

Another sovereign, Peru, is also said to be considering an issue of notes, a source said.

"Apparently they've hired a law firm to adjust the prospectus but I don't know what they're looking to do," the Toronto-based source said. "We still need more details on that."

Said the London trader: "New deal-wise, we're expecting more names. I'm sure there will be more soon."

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