Aeropuertos Argentina, Lebanon sell notes amid global economic worries; Middle East active

By Christine Van Dusen

Atlanta, Dec. 15 - News of a possible ratings downgrade to Spain, anti-austerity strikes in Greece and a touch of end-of-year malaise thinned liquidity, pushed cash prices down and led just Aeropuertos Argentina 2000 and the Republic of Lebanon to do new deals on Wednesday.

"With 3.46% on the 10-year Treasury, we see the same story," a London-based trader said. "There are lower cash prices, but overall, spreads are still holding and performing very well."

Dominating headlines on Wednesday was Spain's review for a downgrade from Moody's Investors Service, which currently has the sovereign at Aa1, due to the sovereign's funding requirements and concerns about the banking industry.

Meanwhile, thousands of workers marched in Athens to protest austerity measures, forcing flight cancellations and closings of schools, businesses and courts.

"That's shaking some people up," said David Riedel, president of Riedel Global Experts, an emerging markets consulting firm. "It's to be expected that would continue, and I wouldn't expect it to change. We continue to have bad news out of the European sovereigns. So people are looking to good emerging markets where there's good fiscal prudence and good opportunity for growth."

Two issuers tap market

Lebanon priced 1.5 trillion Lebanese pound 7.9% notes due 2017 via Byblos Bank, market source said.

The day also saw Buenos Aires-based airport administration company Aeropuertos Argentina price an upsized $300 million of notes due 2020 at par to yield 10¾% via Credit Suisse and Morgan Stanley in a Rule 144A and Regulation S transaction.

Just prior to pricing, the deal was doing very well in the gray market, an investing source said Wednesday afternoon.

"I had thought they would come with a yield in the low 11% area," the source said. "There's still demand or appetite for high-yielding transactions. A high-yielding bond with close to 11% yield makes sense for some people."

The deal was "priced to move," said Luz Padilla, portfolio manager for the DoubleLine Emerging Markets Fixed Income Fund. "To me it shows that the market is functioning properly, and as long as a company is willing to pay, I think there could be demand for more product."

Other than this deal, the primary market was mostly quiet on Wednesday, she said.

"It's more of the same theme we've been seeing for the last week or so. People are heading into year-end and trying not to make too many moves before the closing of the year," she said.

Middle East remains active

A trader was looking to buy $850,000 of Dubai Water and Electricity Authority's 2016 bonds at 96.75 and sell $500,000 of Egypt's 2040 bonds at 107.5. He also sought to buy $1.5 million of Bahrain's 2020s at 101.60 and sell $1 million of Lebanon's 2022s. And he wanted to buy $1 million of Saudi Arabia-based Islamic Development Bank's 2015 bonds at 98.44 and sell $2 million of Kuwait Projects Co.'s 2011 bonds at 99.33.

He noted some "decent changes" for Dubai Water and Electricity Authority's 8½% 2015s, which were seen trading on Wednesday at 105.70 bid, 106.10 offered, as compared to Tuesday's close of 105.87 bid, 106.17 offered.

He also saw some selling pressure in Qatar, with RasGas Co. Ltd., Qatari Diar Finance and Qtel International all well offered.

Said Riedel: "I think there's a good bit of activity going on, certainly this week. People are plugging away, trying to generate gains."

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