Russia's CBOM Finance prints bonds on topsy-turvy day for EM; Lebanon launches; inflows up

By Christine Van Dusen

Atlanta, July 28 - Russia's CBOM Finance plc sold notes on a mixed Thursday for emerging markets debt as continued uncertainty about the U.S. budget debate had some investors unsure about the asset class' status as a safe haven. But the secondary market stayed fairly firm, with prices remaining mostly resilient.

"EM assets had a mixed Thursday, again trading mostly sideways, with some pockets seeing modest gains on some optimism on U.S. debt ceiling negotiations," according to a report from RBC Capital Markets.

The JPMorgan Emerging Markets Bond Index Plus spread tightened 2 basis points to Treasuries plus 265 bps, with most sovereigns narrower or wider by about 5 bps.

"Flipping between discussing the implication of the U.S. debt impasse on the underpinnings of the entire financial system and whether some EM bond looks a few basis points cheap to another is somewhat surreal," a trader said. "But it's safe to say that EM, for now, is still the safe haven."

Said another trader: "Today has been the day when long-duration benchmark EM assets have stepped up to be the alternative of choice, dragging the rest of Europe, the Middle East and Asia with it."

Against this backdrop, Lebanon launched its $1.2 billion two-tranche offering and India's Ballarpur International Graphic Paper Holdings BV planned an issue of notes.

Additionally, inflows into emerging markets funds totaled $925 million for the week ended July 27, according to a report from data tracker EPFR Global. That compares to the previous week's $845 million.

CBOM Finance does deal

In its new deal, Russia's CBOM Finance sold $200 million 8¼% notes due 2014 at par to yield Treasuries plus 758.5 bps, a market source.

The notes priced in line with talk, which was set at the 8¼% area.

Raiffeisen Bank International was the bookrunner for the Regulation S notes, which include a put at par on a ratings downgrade or change of control.

The notes are guaranteed by Credit Bank of Moscow, a lender.

Zijin prices tap

This new deal followed the Wednesday pricing of China-based metals producer and refiner Zijin Mining Group Co. Ltd.'s $200 million add-on to its 4¼% notes due 2016.

BOCI Asia Ltd. was the bookrunner for the Regulation S transaction, according to a company filing.

The issue size now totals $480 million.

Proceeds will be used for overseas activities, including as capital for acquiring copper concentrates overseas for a subsidiary's smelter project.

Other details were not immediately available on Thursday.

Lebanon advances deal

Also on Thursday, Lebanon launched its two-tranche $1.2 billion offering of notes due 2016 and 2022, a market source said.

The deal includes $500 million notes due Nov. 2, 2016, which were talked at 4¾%. The deal also includes a $700 million add-on to the sovereign's existing 6.1% notes due 2022, which were talked to yield 6.2%.

Blom Bank and Citigroup are the bookrunners for the Regulation S notes, which settle on Aug. 2.

IDBI, Ballarpur ahead

In other deal-related news, Mumbai, India-based lender Industrial Development Bank of India (IDBI Bank) is mulling a CHF 175 million offering of notes, a market source said.

The notes could come to the market as soon as August.

This follows the recent news that the company was planning a $250 million issue of seven-year notes, as well as Swiss franc notes, via bookrunners BNP Paribas, Credit Suisse and UBS.

And Gurgaon, India-based paper manufacturer Ballarpur International Graphic Paper Holdings is planning a dollar-denominated offering of perpetual notes, a market source said.

HSBC and RBS are the bookrunners for the deal, which is expected to launch following a roadshow that started Thursday.

Most EM names trade up

In trading, Ukraine opened firm, a trader said.

"Bid sides indicated just 1/4-point weaker," he said.

The sovereign's 2021 dollar notes were up ¾ of a point, at 105.75, by the European afternoon.

And Russia-based Gazprom's 2037 dollar notes were up 1½ points to 110 while good buying was seen for Lukoil.

Qatar's 2040 notes were up 1¼ points to 114 and South Africa's 2041 dollar notes were seen up 1¼ points at 1091/4.

"South African sovereigns are the new U.S. Treasuries," a trader said.

Said another trader: "I can only imagine what's going to happen to prices if the U.S. politicians see the light."

Turkey banks tighten

Looking to Turkey, the action was in the banking sector, where most names were tighter by 10 bps to 15 bps after the central bank confirmed there would be no rate hikes until 2012.

"It's much firmer," a trader said, "but no buying spree like in Russian blue-chip names yet. Banks were trading up, with Finansbank AS and Garanti Bankasi AS' 2021s opening higher.

From Kazakhstan, some of the better-rated names were rallying, he said.

And Islamic Development Bank was getting some attention from investors.

"After being ignored for months, this AAA safe haven has come back to life," he said.

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