Economy worries, G20 inspire selling before holiday; Peru, Odebrecht, others price deals

By Christine Van Dusen

Atlanta, Nov. 10 - Pre-holiday malaise, concerns about the global economy and curiosity about the ongoing meeting of the Group of 20 kept profit-taking alive on Wednesday while issuers like Peru, China Forestry Holdings Co. Ltd., Brazil's Banco Votorantim SA, Brazil's Odebrecht Drilling Norbe XII/IX Ltd., Qatar National Bank and Russia's Vnesheconombank snuck in deals ahead of Veterans Day.

The debt markets started Wednesday off quietly, with the JPMorgan Emerging Markets Bond Index Plus ticking up 2 basis points in the morning before heading into the afternoon about 6 bps wider.

"Generally we're seeing some of the high-betas underperform," said Nick Chamie, global head of emerging market research for RBC Capital Markets.

Argentina's spreads, for example, were 18 bps wider while Venezuela's were 15 bps wider.

"The market was very sloppy and heavy overall," a London-based trader said.

Said Chamie: "People are waiting to see what happens at the G20. They're not sure they want to put on extra risk ahead of that. The wild gyrations we've had in the Treasury markets and currency markets have spooked people, so a lot of people have sidelined themselves."

Peru sells notes

The most notable new deal of the day came from the Republic of Peru, with a $2.5 billion-equivalent, two-tranche issue of notes due 2050 and 2020 via bookrunners Bank of America Merrill Lynch and Morgan Stanley.

The deal included $1 billion 5 5/8% notes due Nov. 18, 2050, which priced at 96.164 to yield 5 7/8%, or Treasuries plus 160.3 bps, in a Securities and Exchange Commission-registered transaction.

The tranche was talked at a yield in the 5 7/8% area.

Proceeds will be used to reimburse Peru's Public Treasury about $63 million in connection with the financing and tender offer of global bonds from April and to pre-finance a portion of the general financial requirements for the year 2011.

The deal also included a S/.4.196 billion tap of the sovereign's 7.84% bonds due Nov. 12, 2020, which priced at 114.718 to yield 5¾% in a Rule 144A and Regulation S transaction, a market source said.

Price talk was set at the 5 7/8% area.

In another new deal, Qatar National Bank priced $1.5 billion 3 1/8% notes due Nov. 16, 2015 at 99.017 to yield mid-swaps plus 180 bps, a market source said.

Barclays Capital, BNP Paribas, JPMorgan, QNB Capital and Standard Chartered were the bookrunners for the Regulation S-only deal, which was talked in the mid-swaps plus 200 bps area.

China in focus

Also pricing notes on Wednesday was plantation forest operator China Forestry Holdings, with $300 million notes due Nov. 17, 2015 at par to yield 7¾%, a market source said.

Deutsche Bank, Standard Chartered and UBS were the bookrunners for the Rule 144A and Regulation S deal, which was talked to yield 7 7/8%.

Proceeds will be used for forest acquisitions and general corporate purposes.

This came as China was in the news, after the People's Bank of China raised reserve requirements by 50 bps, a move that marks "a further step along the road to policy normalization," according to an RBC report.

This could "have a dampening impact on world markets, weighing on commodities and equity markets but potentially providing some support for the U.S. dollar," the report said.

China also released key data on Wednesday, showing that the trade surplus widened and "exports and imports are both continuing to record impressive growth," RBC said. "The strong import data are consistent with other activity indicators showing that China has had only a moderate slowdown in recent months, with domestic demand still solid."

Votorantim sells notes

The day also saw a new deal from Brazil-based lender Banco Votorantim, with CHF 250 million 2¾% notes due Dec. 2, 2013 pricing at par to yield mid-swaps plus 204.25 bps, a market source said.

Deutsche Bank, BB Securities and Banco Votorantim were the bookrunners for the deal, which was talked to yield 2¾%.

Also from Brazil, Odebrecht Drilling Norbe XII/IX priced $1.5 billion 6.35% notes due June 30, 2021 at 98.818 to yield 6 3/8%, or Treasuries plus 370.3 bps, a market source said.

Santander, HSBC, Deutsche Bank and BB Securities were the bookrunners for the Rule 144A and Regulation S deal, which was talked at a yield in the 6½% area.

Proceeds will be used to refinance existing debt related to construction and operation of two deepwater drill ships.

Vnesheconombank prices

In another new deal on Wednesday, Russia-based lender Vnesheconombank priced a $1.6 billion, two-tranche issue of notes due 2017 and 2025 at par, an informed market source said.

The deal included $600 million 5.45% notes due Nov. 22, 2017, which priced at par to yield 5.45%, or Treasuries plus 350.3 bps. The tranche was talked at 5 1/8% to 5½%.

The second tranche totaled $1 billion 6.8% notes due Nov. 22, 2025, which priced at par to yield 6.8%, or Treasuries plus 409.3 bps. The notes were talked at a yield in the 6.8% area.

Citigroup, Credit Agricole, HSBC and JPMorgan were the bookrunners for the Rule 144A and Regulation S transaction.

This followed the late-Tuesday pricing of Abu Dhabi-based oil industry investment company International Petroleum Investment Co.'s two-tranche issue of notes totaling $2.5 billion.

Goldman Sachs, Bank of America Merrill Lynch, HSBC, National Bank of Abu Dhabi, Standard Chartered and RBS were the bookrunners for the Rule 144A and Regulation S transaction.

The deal included $1 billion 3 1/8% notes due Nov. 11, 2015, which priced at 99.642 to yield 3.203%, or Treasuries plus 195 bps. Price talk was set at the Treasuries plus 200 bps area.

The second tranche totaled $1.5 billion 5% notes due Nov. 15, 2020, which came to market at 99.108 to yield 5.115%, or Treasuries plus 245 bps. The notes were talked at a spread in the Treasuries plus 250 bps area.

That deal was "very active," the London trader said, but was seen trading "mostly at or below reoffer."

Issuers mull deals

In other deal news on Wednesday, Hong Kong-based integrated iron and steel manufacturer China Oriental Group is planning an issue of senior notes in a Rule 144A and Regulation S transaction, according to a company filing.

Russia-based natural gas producer OAO Novatek is said to be considering an offering of 10-year bonds worth up to $1.5 billion.

And Abu Dhabi's First Gulf Bank has delayed its planned dollar-denominated offering of notes due 2015 via BNP Paribas, Citigroup, Deutsche Bank, HSBC and National Bank of Abu Dhabi in a Regulation S deal.

Still, "there are a bunch of deals in the pipeline," a market source said.

But it's unlikely that many will come to market on Friday, Chamie said.

"It's a Friday squeezed between a holiday and a weekend, and that's historically always been very thin and low volumes," he said. "That, combined with the volatility of the last couple days in the currency and bond markets and Treasuries, is giving people the right excuse to lay back. I don't think we should expect much."

Little movement on new issues

Meanwhile, recent new issues were either "struggling" or didn't budge much on Wednesday, the London trader said.

The Republic of Lebanon's $500 million 5.15% notes due 2018, which priced this week at par, were trading at about 100.25 mid-market.

The sovereign's second tranche - $225 million 6.1% notes due 2022 that also priced at par - was seen trading at 100.5 during the day.

The $600 million 3% notes due 2015 from Riyadh-based lender Saudi British Bank, which came to market at 99.32 to yield 3.148%, were down at about 99.

"There's not a lot of movement there," a source said.

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