Emerging market debt in holiday lull; two corporates price deals

By Reshmi Basu and Paul A. Harris

New York, Nov. 21 - Emerging market debt eked out gains Tuesday, as trading volumes thinned ahead of an abbreviated trading week in the United States.

In the primary market, two corporates snuck in deals.

Out of Kazakhstan, Kazkommertsbank sold a $500 million offering of 10-year guaranteed senior notes (Baa1/BB+/BB+) at 98.282 to yield 7¾%.

The issue came in line with price guidance for a yield in the 7¾% area.

Credit Suisse and ING were the lead managers for the Rule 144A/Regulation S deal,

From China, Shanghai-based developer Shimao Property Holdings Ltd placed a $600 million offering of senior notes (Baa3/BB+) in two parts

The $250 million tranche of five-year fixed rate notes priced at par to yield a spread of 195 basis points plus Libor. That came at the tight end of revised price talk of 195 to 200 basis points.

The $350 million tranche of 10-year fixed rate notes priced at par to yield 8%, which came in line with revised price talk of 8%.

The total size of the deal was increased from $500 million.

Morgan Stanley and Goldman Sachs & Co. were lead managers for the transaction.

Evraz paper unchanged

In other news, there were no changes seen in secondary bond levels for Evraz Group SA, which saw softer bond prices on news of an acquisition.

On Monday, the Russian company announced that it would acquire Oregon Steel Mills for approximately $2.3 billion.

Later that day, Standard & Poor's lowered its outlook on Evraz to negative from stable, citing its expectation that Evraz's financial profile will deteriorate as a result of this mostly debt-financed acquisition and that Evraz's flexibility under the existing rating will be materially reduced.

The new sterling deal from Hutchison Whampoa UK plc, a subsidiary of Hong Kong-based conglomerate Hutchison Whampoa Ltd saw little movement from its issue price.

On Friday, the company priced an upsized £700 million of unsecured notes (A3/A-/A-) in two tranches.

The conglomerate priced a £300 million tranche of 5 5/8% class A 11-year notes at a dollar price of 99.547, with a 103 basis point spread to Gilts, tight to the Gilts plus 105 bps price talk.

The issuer also priced a £400 million tranche of 5 5/8% class B 20-year notes at a dollar price of 99.371, with a 125 basis point spread to Gilts, tight to the Gilts plus 127 bps price talk.

Prices were seen wrapped around the issue levels in trading Tuesday, observed a source.

EM tighter in light trading

Emerging market debt saw a firmer tone throughout most of the session Tuesday, according to a trader.

Nonetheless, the session was described as uneventful, which is nothing out of the ordinary for this time of year.

In trading, the benchmark Brazilian bond due 2040 gained 0.15 to 132.35 bid.

Elsewhere oil producers such as Venezuela inched higher as oil prices backed up above $60 per barrel, triggered by news of interruptions in oil supply from Alaska.

In trading, the Venezuelan bond due 2027 moved up 0.65 to 124.15 bid.

That oil spike also boosted Ecuador's bonds as politics took a backseat, according to a market source.

Meanwhile another source characterized Tuesday's session as effectively the last full trading day in the run-up to Ecuador's elections on Sunday.

In the secondary, a market source spotted the country's bond due 2012 up a point at 102 bid, 103.50 offered while the longer-dated bond due 2030 were unchanged at 98 bid, 99.50 offered.

Turning to Mexico, the country saw better bids amid stronger performances amongst its peers. Also adding support, president-elect Felipe Calderon named his new economic team, which the market saw as a "positive," noted another market source.

The source noted that members of the new team had solid experience in the public sector.

During the session, the Mexico bond due 2026 added 0.29 to 162.53 bid.

Lebanon's bonds were mostly unchanged from the previous session, despite Tuesday's assassination of the country's Christian cabinet minister Pierre Gemayel.

Following the murder of the outspoken critic of Syria, Moody's changed the rating outlook on the country's debt to negative from stable, citing the country's unstable political environment.

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