Emerging markets sees better sellers on Thursday; Excelcomindo prices tight to revised talk

By Paul A. Harris

St. Louis, Jan. 12 - Across the board there were better sellers in emerging markets fixed-income on Thursday, according to sources.

One source pointed to a sell-off in U.S. equities, as the Dow Jones Industrial Average dipped back below 11,000. Another said profit-taking was the cause.

Observers marked Brazil's dollar-denominated 11% global bond due 2040 - considered the most liquid issue of the asset class - down on the session.

Early Thursday one source had the issue at 130.10 bid, 131.10 offered, down from Wednesday's 130.25 bid.

Late in the afternoon a sell-side official spotted it even lower: 129.75 bid, 130.85 offered, and added that the market was softer all day.

Yet another source had the Brazil 2040 closing at 129.75 bid, 129.90 offered.

A trader confirmed that the 2040 went out at 129.75 on the bid side and commented that Thursday represented the first day of widening for a while in Brazil.

New Brazil 2037 holds in

A sell-side source remarked that Brazil's new 7 1/8% dollar-denominated global bonds (Ba3/BB-/BB-), which priced in a $1 billion issue on Tuesday, had softened slightly but were actually trading tighter than Brazil's dollar-denominated 8¼% global bonds due 2034. The source saw the new 2037 bonds, which priced at a spread to Treasuries of 295 basis points, at a 298 basis points spread on Thursday, versus the 2034 which was at 300 basis points.

Meanwhile a trader saw new Brazil 2037 paper closing around 95.25 bid, five basis points wider in terms of spread.

The trader added that Brazil was down all along the curve

"We've been tightening every day," the trader commented. "This was just a day when sellers came out looking to take some profit."

Having said that, the trader allowed that Colombia proved to be something of an outperformer Thursday, with the Colombia 10 3/8% global bonds due January 2033 three basis points tighter at 135.25 bid, up a quarter in dollar price.

Another source saw Panama as an outperformer on news of its recently announced swap.

Turning to Asia, softness was also seen in The Philippines new dollar-denominated 7¾% bonds maturing in 2031, which priced a week ago.

On Wednesday a trader said that the paper had been trading in a 99.50 bid, 100 offered context.

On Thursday a source saw the Philippines 7¾% bonds due 2031 at 98.625 bid, flat to the re-offer price of 98.641.

Excelcomindo tight to revised talk

On the Asian corporate side, Indonesian cellular telephone operator PT Excelcomindo Pratama Tbk priced a $250 million issue of 7 1/8% seven-year global bonds (B1/BB-) at 99.323 on Thursday to yield 7¼%.

The yield came on the tight end of the 7¼% to 7 3/8% price talk, which had been revised from the 7½% area.

CIMB, JP Morgan and UBS were joint bookrunners for the deal, which went well, according to a market source. Proceeds will be used for capital expenditures.

Talking the deals

Meanwhile, with regard to the primary market's developing corporate issues, evidence surfaced on Thursday that demand is strong, as upsizings were seen, as well as inward revisions of price talk.

In the latter category Banco do Brasil SA (Grand Cayman Branch) revised price talk on its $300 million offering of perpetual notes (Ba1) to 7.95% to 8.10% from 8 1/8% to 8 3/8%.

Citigroup and BB Securities Ltd. are the bookrunners.

Another Latin American financial institution, Argentina's Banco Hipotecario, upsized to $100 million from $50 million a tap of its existing 9¾% senior secured notes due Nov. 16 2010 (B-).

A market source said that the upsizing was based on the demand seen for the paper.

Initial guidance is the 100.50 area.

Books are schedule to close on Jan. 20, with pricing expected thereafter.

Deutsche Bank Securities has the books.

The original $150 million issue priced at 99.035 on Nov. 9, 2005, and was seen early Thursday in a 100.50 bid, 101.125 offered context.

A source commented that Hipotecario is in the process of redeeming all of its floating-rate notes due 2010 at par plus accrued interest.

Following the completion of the transaction, Hipotecario will have repurchased all of its debt due in 2010 that was issued in its 2004 restructuring, becoming the first Argentine company to repurchase in full a tranche of restructured debt issued in the Argentine financial crisis, the source added.

Meanwhile from Asia, BTA Finance Luxembourg SA, a special-purpose vehicle of Bank TuranAlem, Kazakhstan, has issued price guidance on its $150 million offering of hybrid tier I perpetual preferred securities (Baa3/B-/B+) of a yield in the 8½% area.

Credit Suisse First Boston and ING are the underwriters.

The securities are callable after 10 years. If not called, the securities become floating-rate notes with the coupon to float at six-month Libor plus 1.5 times the original swap spread when the bond is priced, a source said.

For example, if the bond is issued with 8½% coupon at par when 10-year swap rate is 4.93%, then the swap spread at launch is 357 basis points and the coupon would become six-month Libor plus 5.355%.

By way of comparison a market source had the dollar-denominated perpetual securities of Kazkommertsbank, the largest commercial bank in Kazakhstan (TuranAlem is second-largest) at 106.25 bid, early Thursday.

The 8¼% Kazkommertsbank paper (Baa3/B/B+) is callable in November 2015.

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