Arcados Dorados prices $450 million, trades up; profit-taking seen as EMBI-plus moves wider

By Paul A. Harris

St. Louis, Sept. 24 - Emerging markets weakened on the back of profit-taking, Thursday, according to an asset manager on the West Coast.

The EMBI-Plus index was 8 bps wider on the day, at 330 bps bid heading to the close, the source said.

Arcos Dorados sells, rises

The Latin American sector generated the lion's share of the primary market news on Thursday.

Arcos Dorados BV priced a $450 million issue of 7½% 10-year senior notes (Ba2//BBB-) at 99.136 to yield 7 5/8%.

The deal was launched late Wednesday at 7 5/8%. That rate was 37.5 bps lower than the initial guidance for a yield in the 8% area, which was heard earlier in the week.

Morgan Stanley and Bank of America Merrill Lynch were active bookrunners for the offering. Citigroup, Banco Itau, Banco Santander and Scotia Capital were passive bookrunners.

Proceeds will be used to repay bank debt and short-term debt, and for general corporate purposes.

The company, which owns the license to operate McDonald's restaurants throughout the region, operates out of Buenos Aires.

The new 7 5/8% notes were about a point higher at 100.15 bid, 100.30 offered, shortly before Thursday's close, up from the 99.136 issue price, but off the day's highs of par ¾ bid, 101 offered, according to a buy-side source.

Embraer plans dollar deal

Elsewhere Empresa Brasileira de Aeronáutica SA (Embraer) will market an offering of dollar-denominated global bonds due 2020 during the week of Sept. 28, according to a market source.

Deutsche Bank Securities and Morgan Stanley are running the Securities and Exchange Commission-registered deal.

Proceeds will be used for general corporate purposes, which may include refinancing the debt of Embraer and its subsidiaries and/or funding working capital needs and capital expenditures.

Embraer is an aircraft manufacturer headquartered in São José dos Campos, Brazil.

Naftogaz steady on exchange news

The NJSC Naftogaz bonds that mature in less than a week were steady at the close of the European session - unmoved by the company's announcement that it wants to exchange bondholders into higher yielding, longer dated paper.

The Naftogaz 8 1/8% notes due Sept. 30 were at 89 bid, 90 offered, "basically unchanged," on the news, according to a trader in London.

Naftogaz proposes to exchange holders into new 9½% bonds due 2014.

In a statement, the troubled Ukrainian energy company "announced the terms of its planned external debt restructuring. The purpose of this restructuring is to address the significant challenges that NJSC Naftogaz of Ukraine faces and to reduce the company's financing risk."

National Agricultural deal tightens in secondary

A New York trader who focuses on Asian fixed income also saw some profit-taking on Thursday, but insisted that flows remain constructive.

There was some selling seen in the sovereign bonds of Indonesia and the Philippines, the trader said. However rumors that Philippines is heading back to the global bond market seemed to have negligible impact, the trader said.

As far as the truth of the talk is concerned, he commented: "You can count on it, but there is nothing specific.

"People need to actually see what the deal looks like before they will do anything," the source added.

The National Agricultural Cooperative Federation (NACF) $500 million deal that priced Wednesday went amazingly well, the trader said, explaining that one reason it did was that allocations were limited to local Korean accounts.

The bonds, which priced at a 268 bps spread to Treasuries, traded as tight as 238 bps on Thursday, the source said.

In other news out of Asia, Hong Kong conglomerate Hutichson Whampoa Ltd. will undertake a bond exchange, seeking to swap holders of bonds maturing in 2010 and 2011 into 2015-dated paper, said the trader, adding that terms are yet to emerge. Details were released later in the day (see story in the Tenders and Redemptions section of this issue).

Hutchison has lately traded a bit heavily, the source said, recounting that early this month the Asian giant priced $3 billion of new notes in tranches of six- and 10-year paper.

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