QTel, VTB Bank price notes as investors digest economic news; trading volumes remain light

By Christine Van Dusen

Atlanta, Oct. 6 - A mild case of fatigue set in for emerging market investors on Wednesday as they grappled not only with the current supply - made heavier by new deals from Qatar's QTel and Russia's VTB Bank - but also the economic numbers coming out of the United States.

On Wednesday, ADP reported that U.S. private sector employment unexpectedly dropped, declining by 39,000 in September. Now the market is anxiously looking ahead to Friday's employment report from the U.S. Department of Labor.

"Everyone's just kind of waiting for Friday," a New York-based market source said. "They want to see how that comes out."

The concern is whether the Federal Reserve will see fit to engage in further quantitative easing.

"It's kind of a bizarre situation," he said. "If the numbers are decent, it will almost be disappointing because it would keep the Fed in a holding pattern in terms of quantitative easing."

If the numbers start coming out stronger, "I'm not sure what will happen," he said. "The market is really banking on QE."

Volumes thin

Volumes were fairly light for most of the day, a corporate debt analyst said. "You don't get the sense there's massive trading going on."

Still, as of mid-day Wednesday, much of the market was "keeping up with the U.S. Treasury spike," a trader said. "But there is a little widening on some names."

He pointed to Santiago, Chile-based lender Banco Estado Chile's 4 1/8% notes due 2020 and Brazil-based steel producer CSN's 7% perpetual notes.

The latter issue was a laggard on Wednesday, as were the recent perpetual notes from Brazil-based petrochemical company Braskem SA and from Brazil-based developer BR Properties.

But most other names "continue to trade higher, continuing yesterday's ascent," the trader said.

CSN's 6½% bonds due 2020, which priced in July at 99.096, traded up at 108½ after opening Tuesday morning at 1071/2. And the 7½% notes due 2020 from Brazil-based paper and pulp company Fibria Overseas Finance Ltd., which priced at 99.136 in April, also traded up at 107.7 versus the previous day's 106½ bid, 107 offer.

"It's just higher. It's just bid," the New York-based market source said. "We are seeing some buying. It's risk-on. And if you get any sort of bad news, people are just banking on the central banks to bail you out."

QTel, VTB bring deals

Wednesday's primary market featured telecommunications subsidiary QTel International's pricing of a $1.5 billion issue of notes due 2016 and 2020, according to an informed market source.

The deal included $500 million 3 3/8% notes due 2016 that priced at 99.243 to yield 3.516%, or Treasuries plus 235 basis points, and $1 billion 4¾% notes due 2020 that priced at 99.161 to yield 4.855%, or Treasuries plus 245 bps.

Barclays Capital, Deutsche Bank, Mitsubishi UFJ Securities, Qatar National Bank, Standard Chartered Bank and RBS were the bookrunners for the Rule 144A and Regulation S transaction.

Also on Wednesday, VTB Bank priced $1 billion senior unsecured loan participation notes due 2020 at par to yield 6.551%, or mid-swaps plus 410 bps, a market source said.

Citigroup, Deutsche Bank and VTB Capital were the bookrunners for the Rule 144A and Regulation S deal, which was whispered to yield in the mid-swaps plus 400 bps area.

The deal initially included a second tranche totaling $500 million due 2016.

Market-watchers were also talking about a possible deal from Colombia's Banco de Bogota SA and the planned $1.8 billion equivalent samurai bonds that Mexico is said to be marketing and could price soon.

Other than that, "things feel a little slow," the debt analyst said. "Issuance has slowed down a little bit. We're just sort of catching up, getting a little breathing room."

The New York-based market source agreed. "The market seems a little tired," he said.

Mexico in demand

One recent issue that got a lot of attention on Wednesday was the new $1 billion 5¾% century bond from Mexico, which priced at 94.276 to yield 6.1%, or Treasuries plus 235 bps.

Deutsche Bank and Goldman Sachs were the bookrunners for the Securities and Exchange Commission-registered deal.

"It's huge, up 5 points maybe," the New York-based market source said at mid-afternoon.

"Supposedly half the issue was reverse inquiries, so that's gone. It's put away, not even coming out," he said. "And supposedly the other half was put away with insurance companies. Hedge funds got nothing."

As a result, "there's not going to be a lot of float in that thing," he said. "Guys might have tried to short into it and got killed."

Fertinal on tap

In other news from Mexico, phosphate fertilizer producer Grupo Fertinal SA de CV's planned five-year notes, totaling between $200 million and $250 million, were whispered to yield 13½%, a market source said.

UBS is the bookrunner for the deal, which was on a roadshow until Sept. 22 and at that time was whispered to yield 12%.

"It's back," the debt analyst said. "It's sort of at least coming from the right direction."

Also on Wednesday, Hong Kong-based developer Central China Real Estate Ltd. was preparing for a roadshow starting on or around Friday for an issue of senior notes, according to a company filing.

Deutsche Bank, ING and Nomura are the bookrunners for the Rule 144A and Regulation S deal, which will be launched subject to market conditions and investor interest.

Proceeds will be used for general corporate purposes and to fund new property projects, including construction costs and land premium.

Also marketing a deal is Brazil-based soft-commodities trading company Ceagro Agricola Ltda. The issuer is on a roadshow until Oct. 15 for a $100 million issue of notes due 2016, a market source said.

Jefferies is the bookrunner for the deal.

And Russia-based steel and mining company Severstal is on a roadshow for a planned benchmark-sized issue of dollar-denominated notes via Barclays, Goldman Sachs and RBS, a market source said.

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