Risk aversion rises on Greece concerns; IRSA plans roadshow; New World, Metinvest price

By Christine Van Dusen

Atlanta, May 14 - Risk aversion was the name of the game on Friday in emerging markets as skeptics continued to question the effectiveness of the eurozone's aid package, leading investors to step away from the asset class and issuers to hold back on bringing new deals, sources said.

"The tone's fairly poor. It's a bit of a disappointing Friday," a London-based market source said. "It started off weaker and continued to the close. It's a very tricky day, very defensive.

"Trading is a little bit low, but still holding in, considering. People were buying risk, but at the moment there's not much appetite out there."

"Credits are coming under pressure," he said. "They're wider across the board. There's no credit that would be tighter today. Everyone's getting beaten up. We're seeing wider spreads with Treasuries and bunds."

The SOVX Europe index was "probably 15 basis points wider" near the European close, the London source said. "It last traded at 213 [bps] and closed at 197 or 198 [bps]."

Treasury yields fell on continued concerns about the global debt crisis, with 10-year Treasuries declining 11.5 bps to 3.45% in early trading and 30-year Treasuries declining 11.8 bps to yield 4.349%.

"Clients are nervous and reducing positions ahead of the weekend," a Europe-based trader said.

Primary quiet again

In turn, the primary was, for the most part, "super, super quiet," a New York-based market source said.

This was particularly true for Latin America, a former hot zone that saw minimal activity all week and only a little bit of news on Friday.

Argentina's IRSA Inversiones y Representaciones SA is looking at issuing $250 million 10-year bonds in a Rule 144A and Regulation S transaction, according to the New York source. A roadshow will begin the week of May 17.

"Let's see how this one does," he said. "The big question will be, what will be the new issue premium for an issuer of this type? People are thinking it could be in the 50 to 100 bps area."

Also from Latin America is the planned dollar-denominated offering of perpetual step-up notes from Brazil's Odebrecht Finance Ltd., which some market-watchers had speculated would be delayed or canceled.

The offering is "still out there," the source said. "It hasn't been officially called or postponed. It's just on the backburner. They did finish the roadshow."

New World, Metinvest price

Some issuers did do deals on Friday.

Amsterdam's New World Resources NV priced a €25 million add-on to its 7 7/8% notes due 2018 at 99.50, according to a market source. The add-on notes from the holding company - whose activities include coal mining and coke production in the Czech Republic - will become fungible with the original €475 million issue, which priced at par to yield 7 7/8% on April 20.

Thursday's primary also saw a new issue from Ukraine's Metinvest, with $500 million 10¼% notes due 2015 pricing at 99.046 to yield 10½%, or Treasuries plus 834.3 bps.

That, along with Kazatomprom's recent $500 million 6¼% notes due 2015 that priced at 98.947 to yield 6½%, or Treasuries plus 424 bps, "did not go so well," the Europe-based trader said. "They are trading at or below issue price."

Inflows plummet

The trader was also keeping an eye on the recent deal from China's Renhe Commercial Holdings Co. Ltd., which priced $300 million 11¾% notes due 2015 at 99.08 to yield 12%, or Treasuries plus 974.1 bps.

"I'm wondering where Renhe will open on Monday," he said. "It seems roughly one point lower."

The allocations on new issues "have turned out to be very high right now," he said. "I guess in this market investment banks cannot push through many other deals."

Inflows into emerging markets bond funds "dissipated" for the week ended May 12 as "the spread between U.S. Treasuries and JPMorgan's benchmark EMBI+ index moved briefly over the 330 bps mark," according to a report from data tracker EPFR Global.

"As markets digested the latest multilateral effort to keep Greece's fiscal woes from doing wider damage to the global recovery, investors sold perceived riskier asset classes during the second week of May," the report said.

Investors committed only $22 million to emerging markets bond funds, as compared to $1 billion a week during the previous month.

The flows that did go into emerging markets bond funds during the week continued to "favor those investing in local currency issues," the report said.

Metinvest prices notes

Ukraine's Metinvest priced $500 million 10¼% notes due May 20, 2015 (B3//B-) at 99.046 to yield 10½%, or Treasuries plus 834.3 bps, according to two sources close to the deal.

BNP Paribas, Credit Suisse, RBS, VTB and ING were the bookrunners for the Rule 144A and Regulation S offering.

Metinvest is a Donetsk, Ukraine-based steel trading company.

New World prices add-on

New World Resources priced a €25 million tap of its 7 7/8% senior secured notes due May 1, 2018 (Ba3/BB-) at 99.50, market sources said.

The deal was a bilateral private placement with one of the company's relationship banks, a source said.

Proceeds will be used for general corporate purposes.

The add-on notes will become fungible with the original €475 million issue, which priced at par to yield 7 7/8% on April 20, 2010.

The issuer is Amsterdam-based central European coal producer with operations in the Czech Republic.

IRSA plans roadshow

Argentina's IRSA Inversiones y Representaciones will hold a roadshow the week of May 17 for a planned $250 million offering of 10-year notes, a market source said.

Citigroup Global Markets, Banco Itau and Santander are the bookrunners for the Rule 144A and Regulation S offering.

IRSA had previously announced plans to sell up to $150 million of class 2 fixed-rate notes due 2020 under its $400 million global bond program. The company's board approved the sale of up to $250 million of the class 2 notes.

IRSA is a Buenos Aires-based real estate, shopping center and hotel company.

Paul A. Harris contributed to this report

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