Emerging market debt tightens on U.S. retail data; Maxcom sells $150 million in notes

By Reshmi Basu, Paul Deckelman and Paul A. Harris

New York, Dec. 13 - Emerging market debt tightened Wednesday, helped by a U.S. Treasuries sell-off on the back of unexpectedly strong U.S. retail sales numbers.

In the primary market, Mexico's fixed line telecommunications company Maxcom Telecomunicaciones SA de CV placed a $150 million offering in senior notes due 2014 (B3/B) at par to yield 11%.

The notes will be callable on Dec. 15, 2010 at 105.50.

Additionally, there will be a 35% equity clawback option if the issuer completes an initial pubic offering of shares within three years of the notes issuance.

The notes also carry a poison put option at 101 in the event there is a change of shareholder control.

Proceeds from the sale will be used to refinance debt and to fund capital expenditures.

Also pricing, Tristan Oil Ltd. placed a $300 million issue of five-year senior secured notes at par to yield 10½%.

The yield came on top of the 10½% price talk, which had been revised from a range of 10¾% to 11%.

Meanwhile in the secondary, the new notes were spotted higher at 102 bid, 103 offered.

Jefferies & Co. ran the books for the non-rated notes which were issued via Rule 144A with no registration rights, and Regulation S.

Tristan is a British Virgin Islands oil and gas exploration and production company operating primarily in Kazakhstan.

Ecuador bolts ahead

The overall trading day was described as "uneventful" by a market source, but he added that Ecuador continued to rally with the help from an investment firm's upbeat outlook.

In a report released Wednesday, Credit Suisse said that president elect Rafael Correa would be much more pragmatic once in office. Additionally, the firm noted that a debt default in 2007 is unlikely.

That sentiment also echoed comments made by Ecuador's former president Lucio Gutierrez at a conference on Monday in New York.

The bullish outlook following his remarks has triggered a three-day gain for the credit.

At session's close, spreads were narrower by 50 basis points on the day as the Ecuadorian bond due 2012 gained 2.25 to 98 bid, 99 offered while the bond due 2030 surged 3.25 to 92.25 bid, 93 offered.

EM up on Treasuries sell-off

More broadly, sources observed that with the year-end fast approaching, the market has started to wind down, especially now that investors have secured a double-digit return for the asset class.

But even as trading volumes eased, the asset class saw more tightening Wednesday, sparked by robust retail sales in the United States. Those numbers suggested that the United States was not heading into a major slowdown, triggering a sharp sell-off in Treasuries. In late afternoon, the yield on the 10-year note was spotted at 4.57% from 4.49% late Tuesday.

At the end of the session, emerging market spreads were narrower by 7 basis points.

With the exception of Ecuador, overall price movements were range-bound, noted sources.

High beta credits such as Argentina and Brazil eased on a price basis. During the session, the Argentine discount bond due 2033 gave up 0.35 to 106.10 bid, 106.50 offered. And the bellwether Brazilian bond due 2040 shed 0.35 to 133 bid, 133.05 offered.

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