Indian Oil, Colbun price deals; Brasil Foods kicks off benchmark 10-year; Latin America weak

By Cristal Cody and Paul A. Harris

St. Louis, Jan. 14 - The emerging markets primary remained active on Thursday.

Indian Oil Corp. Ltd. priced its $500 million issue of five-year notes (Baa3/BBB-) at mid-swaps plus 233 basis points.

The spread came in line with price talk of mid-swaps plus 220 basis points to 240 bps.

Deutsche Bank, HSBC and Standard Chartered Bank managed the Regulation S offering.

Proceeds will be used to help fund capital expenditures.

The bonds were seen ½ point higher in the gray market ahead of pricing, a buy-side source said.

Colbun upsizes

Meanwhile Chilean electricity producer Colbun SA priced an upsized $500 million issue of 10-year senior unsecured notes (/BBB-/BBB) at 98.973 to yield 6.139%.

Citigroup and JPMorgan were joint bookrunners for the deal, which was upsized from $400 million.

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

Brasil Foods plans benchmark

Brasil Foods SA mandated Itau, JP Morgan and Santander to lead its benchmark-sized offer of dollar denominated 10-year notes (expected ratings Ba1/BB+), according to a market source.

The Rule 144A and Regulation S deal starts roadshowing on Monday in London. The deal will subsequently be presented on Tuesday in Boston and New York, and on Wednesday in New York and on the U.S. West Coast.

It is scheduled to price after the meetings finish, subject to market conditions.

The food company is headquartered in Sao Paulo, Brazil.

New Poland paper straddles issue

Poland's new 5.25% notes due January 2025 (A2/A-/), which priced on Monday in a €3 billion issue, were straddling the 98.795 reoffer price during the European session, a trader said.

"They are weaker with everything else, but probably outperforming the rest of the curve," the London-based source remarked near the market's close there.

The trader had the new Poland 5.25% notes at 98.70 bid, 98.85 offered, versus the 98.795 issue price.

Latin America weaker

Latin American debt was weaker on Thursday, according to Enrique Alvarez, head of Latin America fixed-income research at IDEAglobal.

U.S. retail sales data served as the catalyst for that weakness, said Alvarez, who spoke during the early part of the New York afternoon.

"The LatAm space is divided," he added, noting that Argentina and Venezuela, both presently in the grips of "intense domestic drama," were holding prices captive, and moving them to the down-side, over the course of the past five days.

"Meanwhile the rest of the market is slowly eroding because there is less of an investor desire to hold bonds at these levels," the strategist remarked.

News out of China - slightly higher rates on three-month bills, and some tightening with respect to bank reserve requirements - is probably not to investors' liking, Alvarez said.

"On top of that you have U.S. data which is not necessarily pointing in a desirable direction," he added.

Brazil's dollar-denominated 8¼% global bonds due January 2034 were up ¾ point on the day at 126¼ bid, the strategist said.

However, previous to Thursday that paper had been much weaker than the rest of the market, probably on a technical factor, Alvarez notes.

"A little more selling came into that, over the past couple of days, because it has a little more liquidity.

"It's a little stronger today. However that does not denote the general tone of the market, which is softer."

Meanwhile Argentina's debt strengthened on Thursday, although it has slipped considerably over the course of the past week.

Argentina's dollar-denominated discount bonds due 2033 were at 69 bid, 69½ offered, up 2¼ points on the day. However last Friday the discounts were at 71¼ bid, the IdeaGlobal strategist noted, adding that they were 77 bid on Jan. 4, the first trading day of 2010.

Venezuela's dollar-denominated 9¼% bonds due in 2027 were a little softer on Thursday, at 79¾ bid, down ½ point on the session.

Post-devaluation rally recedes

Venezuela's 2027 bonds were at 83 bid last Friday, when the government there devalued its currency, Alvarez said.

The official exchange rate went to $2.60 for the bolivar, from $2.15. That rate is for primary necessities (primary imports).

The exchange rate for all other applications moved to $4.30.

The Venezuelan government wants the semi-legal parallel exchange rate (i.e. the black market rate), which was up at $6.10, to come within 15% of the $4.30 rate, Alvarez said.

In order to intervene on the parallel exchange rate, the Venezuelans are offering xauctions of 90-day zero-coupon bonds at $4.30.

The bonds are sold at a healthy premium. For every $1 million of notional value an investor pays around $1.16 million.

"After three months that gives you dollars at approximately five bolivars per dollar," Alvarez said.

The news of the auctions sparked a 4% to 5% rally in Argentine debt because it meant that the fiscal numbers were going to look much better, the strategist said.

"That's always the immediate impact of a devaluation.

"Now that they have undertaken the auctions, with the potential of very large inflation out there, Venezuela has done an about-face.

"The debt is now about at the same levels where it was before the devaluation."

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