Paraguay, Powerlong, VTB print notes; spreads widen slightly; EM bond fund inflows improve

By Christine Van Dusen

Atlanta, Jan. 18 - The Republic of Paraguay, China's Powerlong Real Estate Holding Ltd. and Russia's OJSC VTB Bank sold notes on Friday, marking the end of a week that saw inflows tick up and spreads move wider.

"The market this morning appears to be waiting for the supply flood that is expected next week in EM," a London-based analyst said. "Next week should be a good test of overall cash levels, with decent new issue supply expected. With equities at the highs and core credit indices close to their tights, it will be a good test of sentiment."

Indeed, several issuers were lining up deals for the coming weeks, including Peru's Fondo Mivivienda SA and Dominican Republic-based Banco de Reservas de la Republica Dominicana (Banreservas).

The Markit iTraxx SovX index spread opened Friday 2 basis points wider while the corporate index moved out 4 bps.

In trading, bonds from Turkey's banking sector saw support ahead of a potential ratings change for the sovereign, the analyst said.

And notes from Ukraine finished the week somewhat firm, with sovereign eurobonds adding about a point on the long end of the curve, said Svitlana Rusakova of Dragon Capital.

The sovereign's 2017s were seen at 110 bid, 111 offered while the 2021s moved up to 105¾ bid, 106¾ offered, and the 2022s climbed to 102¼ bid, 103¼ offered.

"The newly issued Ukreximbank 2018s failed to take note of that, though," she said, noting they were bid at about par. "Meanwhile, less liquid high-yielding bonds saw good demand."

Inflows rise a touch

In other news, emerging markets bond funds saw inflows of $2.02 billion for the week ended Jan. 16, according to data tracker EPFR Global.

That's up slightly from the previous week's $2 billion.

"The ratio of flows for local currency versus hard currency funds was 1.1-to-1 last week. It was 5-to-2 this week," said Cameron Brandt, director of research with EPFR.

Paraguay does deal

In its new deal, Paraguay priced a $500 million issue of 4 5/8% notes due Jan. 25, 2023 at par to yield 4 5/8%, a market source said.

Citigroup and Bank of America Merrill Lynch were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used to finance infrastructure and energy projects.

Powerlong sells bonds

China-based real estate company Powerlong priced a $250 million issue of 11¼% notes due Jan. 25, 2018 at 98.608 to yield 11 5/8%, a market source said.

Bank of America Merrill Lynch, Deutsche Bank, HSBC and RBS were the bookrunners for the Regulation S deal.

Proceeds will be used to refinance existing indebtedness.

VTB prices renminbi notes

Also on Friday, Russia's VTB Bank priced an RMB 1 billion increase of its 4½% notes due Oct. 30, 2015 at 101.8 to yield 3.802%, a market source said.

HSBC and VTB Capital were the bookrunners for the Regulation S-only transaction.

Mivivienda on roadshow

In other deal-related news, Peru-based mortgage financing institution Mivivienda was on a roadshow for a dollar-denominated issue of benchmark-sized notes, a market source said.

Bank of America Merrill Lynch and Citigroup are the bookrunners for the deal.

The roadshow began on Friday in Lima and will travel to London, Santiago, New York and Bogota before concluding on Jan. 23 in Boston and Los Angeles.

Banreservas plans notes

Dominican Republic-based Banreservas is planning a dollar-denominated issue of notes, a market source said.

The proceeds will be used for general business purposes, according to a report from Fitch Ratings.

Banreservas is a lender based in Santo Domingo.

Marfrig oversubscribed

The final book for Brazil-based food processor Marfrig Alimentos SA's $600 million 9 7/8% notes due July 24, 2017 was more than $3.5 billion, a market source said.

The notes priced this week at par to yield 9 7/8% after being talked at the 10% area.

Bank of America Merrill Lynch, Bradesco BBI, BB Securities and Itau BBA were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used to extend the company's debt maturity profile and for general corporate purposes.

About 49% of the orders came from the United States, 26% from Europe, 16% from Latin America and 9% from Asia.

Asset managers picked up 37%, hedge funds 22%, retail investors 27%, banks 8% and others 5%.

Demand seen for Yuexiu

Also oversubscribed was China-based Yuexiu Property Co. Ltd.'s two-tranche issue of $850 million notes due on Jan. 24 of 2018 and 2023.

The combined final book was $3 billion from 172 accounts.

The deal included $350 million 3¼% notes due 2018 that priced at 99.381 to yield 3.287%, or Treasuries plus 255 bps. The tranche priced at the tight end of talk, set at Treasuries plus 255 bps to 260 bps.

About 76% of the orders came from Asia and 24% from Europe and others.

Fund and asset managers accounted for 39%, banks 24%, private banks 24%, insurance and agencies 10%, others 3%.

Asian investors buy Yuexiu

The second tranche of new notes from Yuexiu Property - $500 million 4½% notes due 2023 -priced at 99.459 to yield 4.568%, or Treasuries plus 275 bps. The notes were talked at a spread of 275 bps to 280 bps over Treasuries.

About 89% of the orders came from Asia and 11% from Europe and others. Fund and asset managers picked up 35%, private banks 33%, banks 16%, insurers and agencies 15% and others 1%.

Bank of China, DBS Bank, HSBC and Morgan Stanley were the bookrunners for the Regulation S offering.

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