Emerging market debt softer despite firm U.S. stocks; Woori Bank issues new debt

By Reshmi Basu and Paul Deckelman

New York, April 25 - Emerging market debt traded with a heavy tone Wednesday, unable to pull ahead even as the Dow Jones Industrial Average index pierced 13,000 for the first time.

Meanwhile in the primary market, Seoul-based Woori Bank sold a $1 billion offering of 30-year hybrid tier I notes (Baa2/BBB/BBB+) at par to yield Treasuries plus 157 basis points.

The deal came at the tight end of revised guidance, which was cut to 157 to 159 basis points from initial talk of 160 basis points area more than Treasuries.

The notes will be non-callable for 10 years. If the notes are not called, the coupon will change to the comparable floating rate and will step up by a further 100 basis points.

ABN Amro, Credit Suisse, Deutsche Bank, HSBC, Merrill Lynch and Woori Investment and Securities were joint lead managers for the Rule 144A and Regulation S deal.

From Kazakhstan, JSC Halyk Bank sold a $700 million offering of 10-year senior notes (Baa1/BB+/BB+) at 99.168 to yield 7.369%.

Proceeds from the sale will be used for general corporate purposes.

Citigroup and Dresdner Kleinwort were lead managers for the Rule 144A and Regulation S deal, which were issued via HSBK (Europe) BV.

Halyk Bank, which is a full-service bank in Kazakhstan, will guarantee the notes.

Elsewhere the International Bank for Reconstruction and Development (Aaa/AAA) sold a TRY 500 million offering of 10-year global bonds at 98.04 to yield 14.001%.

The deal priced in line with guidance of 14% area.

ABN Amro, JP Morgan and TD Securities were lead managers for the deal, which was launched under the issuer's global debt issuance facility.

In other pipeline news, price guidance surfaced from Banco Mercantil do Brasil (B1/B).

The midsize bank talked its dollar-denominated offering of five-year amortizing notes in the area of 7¾%. .

The notes will amortize in the third, fourth and fifth year.

Dresdner Kleinwort is the bookrunner for the Regulation S transaction.

Two corporates issue talk

Coming from Asia, Hyundai Card Co., Ltd. (/BBB/BBB) has set price talk for its benchmark-sized dollar-denominated offering of three-year bonds at Libor plus 43 to 45 basis points.

Barclays Capital, Morgan Stanley, RBS and UBS Investment Bank are joint bookrunners for the Regulation S transaction.

Seoul-based Hyundai Card is the credit card unit of Hyundai Motor.

And Shanghai-based developer China Properties Group Ltd. set price talk for its $300 million offering of seven-year senior unsecured notes (B1/B+) at 9¼% to 9½% on Wednesday.

The Rule 144A for life notes offer, which is being led by Merrill Lynch & Co., is expected to price on Friday.

The notes will come with four years of call protection.

Proceeds will be used to finance existing projects and potentially to acquire new properties.

EM stuck ahead of GDP

Back to secondary trading, emerging market debt failed to capitalize on the strong performance of U.S. stocks Wednesday. Investors are reluctant to add risk ahead of Friday's release of U.S. gross domestic product data as spread hover around historical low spreads.

Philippines recovers after treasurer quits

A New York-based trader in Asian debt said that virtually all of impact from the unexpected resignation of Philippines treasurer Omar Cruz on that country's bonds had come on Tuesday in Asia, after the news hit the tape, and there was little evidence Wednesday of the market gyrations which followed.

He said that CDS contracts widened out about 5 basis points on the headline indicating that the official had handed in his resignation, effective at the end of next month. "There was some selling - more just the Street hitting some bids on the cash [bond] side as well, and that took some prices down, by ¼ or 3/8 point, very briefly."

But he said that "there was very little follow-through here, even after the story was confirmed, and the general consensus is that he is looking to go back into the private sector," rather than the juicier speculation that the resignation was somehow motivated by disagreements with president Gloria Arroyo's government - speculation that Cruz himself took pains to deny.

"The market is viewing it as not particularly threatening," even though Cruz commanded considerable respect in the financial world for having improved the Philippines' balance sheet since assuming the treasurer's post in February 2005. Among his accomplishments were restructuring the country's $81 billion of foreign debt and completing a $1 billion bond sale in January.

The trader said that after the initial downside flurry, a knee-jerk reaction to the stunning news, "the CDS has pushed back toward the levels they were trading at before the news hit, and we're now seeing pretty good buying on the cash side" as well.

He said the spread on the 5-year Philippine CDS was 104/108 bps on Wednesday, "roughly where they were before the news hit."

He said that the bid side spread had initially widened to 110 bps, or perhaps even 112 bps, but then began to come back in as the market digested the news. He said the movements had come Tuesday, and on Wednesday, "it's just pushed tighter."

He called cash bonds "slightly higher, probably about 1/8 point or so from where they were before this all began. It's actually been relatively stable on the cash side."

The Philippine government bonds due 2031 were being quoted at a price of around 113, while its 2032 bonds were at 97.625.

The trader also dismissed the notion that there had been any kind of substantial impact on the Philippines bonds from Tuesday's announcement by international investment giant Merrill Lynch & Co. that it was urging EM investors to lighten their positions in the sovereign, citing its concern over the lagging pace of tax collections and the impact that might have on Manila's ability to meet its fiscal goals. The investment bank also urged a lightening up on the recently stronger bonds of Colombia, and of Serbia as well, and said investors should overweight the recently lagging Venezuela, as well as Turkey.

Elsewhere, the trader noted the pricing of Woori Bank's $1 billion 30-year offering, calling it "a very successful deal"; he said the issue was larger than originally envisioned, and came to market at a tighter spread, and had traded up by about half a basis point once it was freed for secondary dealings.

Otherwise, he said, "there hasn't been a great deal of activity. It sounds firm," but he said that upside was limited, even given the strength in equities, "and it's been relatively quiet outside of Indonesia, the Philippines and this Woori deal."

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