Emerging markets primary active; Chile, Banco BMG, Nile Finance, IDBI price new paper

By Christine Van Dusen

Atlanta, July 29 - The new issuance pipeline for emerging markets debt gushed on Thursday as issuers took advantage of a rise in investors' risk appetite.

"It's strong, a very strong market across the board," a London-based trader said. "Appetite for risk is still on the table. Technicals are in our favor. The wider markets, namely equities, are doing well and we're doing very well."

Getting at least part of the credit was Thursday's report that U.S. jobless claims for the week ended July 24 declined 11,000 to 457,000 and, in the four-week average, dropped 4,500 to 452,000.

In other upbeat news, Ukraine - which recently canceled a eurobond offering - finalized its loan agreement with the International Monetary Fund and will soon receive a first disbursement of $1.89 billion.

As a result of this and generally favorable market conditions, new issuance is coming "thick and fast," the London trader said.

Chile, BMG print notes

Issuers "are just taking advantage of stronger risk markets and therefore there's been a lot of new issuance in the last week. Today is another example of that," a market source said. "There are lots of new issues."

Chile priced $1.5 billion equivalent of dollar- and Chilean peso-denominated notes due 2020 via Citigroup, HSBC and JPMorgan in a Securities and Exchange Commission-registered transaction, a market source said.

The deal included $1 billion 3 7/8% bonds priced at 99.877 to yield 3.89%, or Treasuries plus 90 basis points, and Chilean peso-denominated bonds worth $520 million that priced at par to yield 5½%.

Proceeds will be used for earthquake-related reconstruction efforts.

The Chile deal was "hugely oversubscribed," a trader said. "The overbought theme is taking on more prominence as the EM train keeps rolling along."

The day also saw Brazil-based lender Banco BMG price $250 million 7 7/8% tier 2 notes due 2020 to yield 8 7/8%, a market source said. BCP Securities, Morgan Stanley, Banco Bradesco and Santander were the bookrunners for the Rule 144A and Regulation S deal.

Nile Finance, IDBI price

Also printing on Thursday was Egypt's Nile Finance Ltd., which sold $600 million 5¼% bonds due 2015 at par to yield Treasuries plus 356.7 bps in a Regulation S-only deal via Morgan Stanley, Citigroup and Deutsche Bank.

And India-based lender IDBI Bank priced $350 million 4¾% notes due 2015 at 99.943 to yield 4.762%, or Treasuries plus 310 bps, in line with talk. Barclays Capital, BNP Paribas, RBS, HSBC and Standard Chartered were the bookrunners for the deal.

Turkey had been expected to price an add-on to its $1 billion 5 5/8% notes due 2021 with a yield of 5¼% via Goldman Sachs and Barclays Capital, but by late Thursday no details were available. The original issue priced at 98.986 to yield 5¾%.

"You had a poor climate from May to June, so now you've got a climate with much better risk appetite," a market source said. "The stress tests are now behind us. The market has some pent-up demand. Issuers have pent-up supply. U.S. Treasury yields remain very low so the total yield they're issuing at is very attractive to them as well."

"I think we're also getting the frenzied rush before the real doldrums of August," he said.

Russian issuers plan deals

Other bond offerings took steps toward the market. Moscow-based joint-stock bank and Gazprom subsidiary Gazprombank talked its planned $500 million bonds due December 2014 at 6¼% to 6 3/8%, according to a market source.

Barclays, UBS and RBS are the bookrunners for the deal, which could price this week.

Also from Russia, Bank of Moscow has mandated UBS for a potential issue of Swiss franc-denominated notes, according to a market source. A roadshow is expected to take place soon.

This follows the recent pricing of Russian lender Sberbank's add-on of $500 million to its $1 billion 5.499% notes due 2015. The tap issue priced at par to yield 5.499%. The original issue also priced at par to yield 5.499%, or mid-swaps plus 345 bps.

Also on Thursday, sources were whispering about a possible sukuk offering from Kazakhstan, which had been expected to bring a eurobond deal to market but scrapped those plans.

"The only technical negative is the supply," the London trader said. "But so far all this supply, both sovereign and corporate, has been hoovered up. Or it will be, eventually. It may take a little while and we may get a little bit of indigestion, but the market is still on track. We've moved on from the stress tests and the growth story is back on."

There are indications, he said, that things aren't quite as pleasant as they appear.

"A lot of gurus out there are saying there's going to be a nasty double-dip recession, but for now it's just 'rock on,'" he said.

He expects to see the flow of new issuance continue into the Aug. 2 week. "We'll keep seeing issuance as issuers continue to take advantage of conditions," he said.

Volumes lighter

Meanwhile, Latin American credit was in "somewhat of a holding pattern" on Thursday, a trader said, with "volumes taking on a more mid-summer-like feel."

Recent issues are "holding their own" and trading slightly above reoffer in the secondary market, he said.

Emerging market bonds in general had "another consolidation-type day on lighter volumes," another trader said.

Spreads were mostly unchanged and prices pulled back from early highs, he said. "Overall activity has gotten lighter the last two days as this consolidation-type activity plays out."

Higher-beta credits were up about "0.75 to 1 point at the highs," he said. But they drifted back to "near unchanged" or "up slightly," he said.

"External market moves influence price action" hour by hour, he said. But the "pattern of higher prices and tighter spreads is what many feel is a path that EM bonds will continue to travel."

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