Emerging market debt trading in narrow ranges; three corporates sell new debt

By Reshmi Basu, Paul Deckelman and Paul A. Harris

New York, Feb. 8 - Emerging market debt remained range-bound Thursday in the absence of any major U.S. economic indictors to shove the market in one direction or another.

Meanwhile the primary market remained active on the corporate side.

Out of the subcontinent, State Bank of India (Baa2/BBB-/BBB-) sold a $700 million two-part note offering.

The first tranche included $400 million of hybrid tier I perpetual notes, which priced at par to yield 120 basis points more than mid-swaps. That came at the tight end of revised talk, which was set at mid-swaps plus 120 to 125 basis points, lowered from 125 to 135 basis points.

Those notes are callable on Feb. 15, 2017. If the notes are not called, the coupon steps up by 100 basis points.

Meanwhile the second tranche was comprised of $300 million in five-year senior notes, which priced at par to yield Libor plus 38 basis points. That also priced at the tight end of revised guidance, which was lowered to Libor plus 38 to 40 basis points from initial talk of 40 to 43 basis points.

Barclays Capital, Citigroup, Deutsche Bank and HSBC were mandated to lead the Regulation S deal, which was priced off the bank's euro medium-term note program.

Also issuing new debt, Ukraine's Ukrsotsbank JSCB sold a $400 million offering of three-year loan participation notes (B2/B/B-) at par to yield 8%.

ABN Amro and Credit Suisse ran the books on the Regulation S deal, which was issued via Credit Suisse International.

Moving to Argentina, GC Impsat Holdings I plc priced a $225 million offering of 10-year senior unsecured notes at par to yield 9 7/8%.

The issue is non-callable for five years.

Credit Suisse was the bookrunner for the Rule 144A and Regulation S deal. Deutsche Bank acted as the joint lead manager.

The issuer is a corporate communications provider with headquarters in Buenos Aires, Argentina.

High beta credits nudge lower

Returning to the broader secondary market, higher beta credits edged down while smaller sovereign names moved higher.

The market traded in a tight range as overall spreads widened by one basis point versus Treasuries.

There was some profit-taking on the back of sluggish equities but a spike in crude oil prices provided some cushion, noted sources.

The asset class is also pushing up against historical tights, remarked a market source, who warned that investors are now beginning to lose confidence in the market's ability to sustain these levels.

In the last two sessions, the market has stalled, although there has been some buying, particularly on the long-end.

Asia sees light trading

Meanwhile the Asian trading session Thursday witnessed light trading volumes, given the absence of any news.

On the high-grade side, corporates underperformed sovereigns, according to a source. On the non-investment grade front, both the Philippines and Indonesia were softer on the day as the latter was hurt by Wednesday's new issue of $1.5 billion 6 6/8% notes due 2037.

The new bullet notes were softer at the open but closed around its issue price of 98.40.

Turning to the New York session, the 2037 notes continued to hover around the issue price.

On the Asian corporate side, Korean computer-chip manufacturer MagnaChip Semiconductor's 8% notes due 2014 were seen up 2 points on the session at 69 bid, 70 offered. A trader cited sector strength, with MagnaChip helped by positive news about Korean telephone handset producer LG Electronics.

The company reportedly has won a contract organized by the GSM Association - a worldwide wireless industry trade group - to produce a low-cost handset for third generation mobile phone networks. The reports said that the winner of the contract, which is expected to receive orders for several million handsets by as much as a dozen mobile carriers, including such industry powerhouses as Cingular, T-Mobile, Vodafone and Orange, will officially be announced next week at the 3GSM mobile communications trade show in Barcelona.

GC Impsat higher in secondary

In Latin American secondary trading Thursday, GC Impsat's new 9 7/8% notes due 2017 were seen having firmed smartly to 101.5 bid from their par issue price earlier in the session.

"We saw decent two-way" flows in the new deal, a trader said.

Some sold their allocations at a profit, he noted, continuing: "A lot of guys added to their positions. It traded well today [Thursday]."

He saw a fair amount of demand for the new issue - at his own shop, which was not one of the underwriters, they traded $20 million of the bonds, which he called a "pretty solid issue" and "decent [sized] trading."

New Cemex perpetual higher

He also saw the new Cemex SAB de CV 6.64% perpetual hybrid bonds "hanging around" the levels at which the Mexican cement producer's new notes were seen late Tuesday, "wrapped around" the 187 bps spread-versus Treasuries level at which those bonds priced.

He said the company's existing five-year notes and 10-year notes "have done OK. They've held in there" in a broadly defined 150 to 200 bps range over Treasuries, and "they haven't really moved in a couple of weeks, back-and-forth, two [or] three basis points,."

Overall, he said "there was a little volatility today [Thursday]," with [U.S.] equities and Treasuries." U.S. shares were pulled down amid new signs of weakness in the housing market. Bonds, on the other hand, were tighter.

"We outperformed," he said of the Latin American debt market, with spread tightening pretty much "across the board.

"It was a volatile day in corporates in general, but generally saw better buying," he added.

Brazil, Venezuela up

In sovereign debt Thursday, Ecuador outperformed the market as its spreads tightened by 28 basis points, according to a market source.

Smaller credits such as Colombia and Panama grinded tighter while high beta credits such as Argentina felt the pinch.

At the end of the session, the Brazilian bond due 2040, firmed by 0.063 to finish bid at 132.813. Among other names, the Ecuadorian bond due 2012 gained 2.50 to 86 bid, 88 offered.

In trading, the Colombian bond due 2033 added 0.88 to 142.90 bid, 144.25 offered. And the Argentine discount bond due 2033 gave up 0.45 to 113.75 bid, 114.25 offered,

Venezuela's bonds were seen firmer, with the oil-rich nation's debt propped up by a rise in world petroleum prices. Light, sweet crude settled up $2 per barrel at $59.71 in Thursday's dealings on the New York Mercantile Exchange - its peak price level so far this year, and well up from recent lows in the $50 per barrel range.

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