EM remains in favor; Lat-Am spreads widen; roadshow for China Railway; Macedonia cancels deal

By Christine Van Dusen

Atlanta, July 15 – Sentiment for emerging markets assets remained mostly solid on Friday, even as Latin American credit moved wider and cash prices came under pressure from economic data and weaker U.S. Treasuries.

“Recent economic data has supported the current sentiment strongly in favor for EM,” a London-based analyst said, noting that inflows for the week ending July 13 were the second highest, year-to-date.

Brazil’s five-year credit default swaps spreads finished the session at 295 basis points from 293 bps, while Mexico’s moved to 144 bps from 138 bps, a New York-based trader said.

“Latin American high yield finishes mixed on the day, with Venezuela firmer, whereas Argentina is unchanged to slightly lower,” he said.

Venezuela’s 2027s closed at 49.25 from 48.50, PDVSA’s 2017s finished at 73.50 from 73.35 and Argentina’s Bonar 2024s closed at 116.70, mostly unchanged. Argentina’s 2026s were down a touch, he said, at 108.80 from 109.15.

“Flows on the lighter side, with better sellers of low-beta paper throughout the day,” he said. “The market feels a bit caught off-guard with the recent back up in rates. The thinking became that rates could not sell off and that negative yields would continue to drive a reach for duration and any pickup. The long fixed income trade may be a bit overbought and crowded at this juncture, so a bit of weakness and consolidation should be viewed in a positive light.”

All of this came again against the backdrop of another terrorist attack in France, where a truck driver slammed into a crowd celebrating Bastille Day in Nice and killed at least 84 people.

China Railway sets roadshow

China Railway Group Ltd. will set out on July 18 for a roadshow to market a possible issue of notes, according to a company filing.

Standard Chartered Bank and HSBC are the joint global coordinators and – with UBS, Bank of China, DBS Bank and China Everbright Securities – the joint lead managers and joint bookrunners for the Regulation S deal.

Proceeds will be used for working capital and general corporate purposes.

The construction group is based in Beijing.

Macedonia postpones bonds

Macedonia is postponing a seven-year issue of euro-denominated notes after the legality of the transaction was challenged, a market source said.

Citigroup, Deutsche Bank, Erste Group and Societe Generale were the bookrunners for the Rule 144A and Regulation S deal.

Initial talk had been set in the 5½% area.

Other details were not immediately available on Friday.

Galicia sells notes

On Thursday, Argentina’s Grupo Financiero Galicia SA priced $250 million notes due in 2026 at a yield of 8¼%, a market source said.

Deutsche Bank and JPMorgan were the bookrunners and Standard Chartered Bank the lead manager for the Rule 144A and Regulation S deal.

The notes are non-callable for five years.

Other details were not immediately available on Friday.

Grupo Financiero Galicia is a Buenos Aires-based financial services holding company.

Petrobras Argentina bonds

Petrobras Argentina SA priced $500 million of notes due in 2023 at a yield of 7½%, a market source said.

The notes were issued concurrent with a tender offer for the company’s 5 7/8% series S notes due 2017 until 11:59 p.m. ET on Aug. 2, according to a company announcement.

The total purchase price will be $1,041.25 for each $1,000 principal amount of notes tendered by the early tender deadline of 5 p.m. ET on July 19. The total amount includes an early tender premium of $30.00 per $1,000 principal amount.

Holders who tender after the early deadline will receive the base tender payment of $1,011.25 per $1,000 of notes.

The company also will pay accrued interest to but excluding the settlement date.

The offer is contingent upon the closing of a concurrent offering; however, the concurrent offering is not conditioned on completion of the offer. The offer does not require any minimum principal amount of notes being tendered.

Tendered notes may be withdrawn before the early tender deadline.

Citigroup Global Markets and Deutsche Bank Securities are the dealer managers.

Other details on the new issue were not immediately available on Friday.

Petrobras Argentina SA, formerly Petrobras Energia SA, is a Buenos Aires-based energy company.

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