Brasil Foods, Malaysia's IOI, Banco Continental Paraguay price; Qatar, IPIC still 'robust'

By Christine Van Dusen

Atlanta, June 20 - BRF Brasil Foods, Malaysia's IOI Corp. and Banco Continental Paraguay SAECA priced notes on a Wednesday that saw emerging markets spreads firm up as the Federal Reserve extended its bond-buying program and reports emerged that the European bailout fund may be used to buy sovereign bonds.

"The market is holding well from yesterday," a New York-based trader said. "It looks as though, at least, the market has priced in the continuation of Operation Twist but it has not priced in to what degree the program will continue."

Said a London-based trader, "Spreads are very firm, especially with the 10-year Treasuries moving to 1.66%, helped by heavy Bund technicals too."

Emerging markets investors continue to cast only a sideways glance at the troubles of the euro zone, and EM bonds are managing to perform fairly well regardless of the positive or negative headlines.

"The baseline assumption in EM asset markets is a muddle-through scenario with regard to the key global event risks," according to a report from Barclays Capital Markets.

Against this backdrop, palm oil and property company IOI priced a $600 million issue of 4 3/8% notes due June 27, 2022 at 99.288 to yield Treasuries plus 280 basis points, a market source said.

Citigroup, HSBC, Mitsubishi UFJ and Morgan Stanley were the bookrunners for the Regulation S deal.

Food processing and beverage company Brasil Foods priced a $250 million add-on to its outstanding 5 7/8% notes due June 6, 2022 at 102.830 to yield 5½%.

BB Securities, HSBC, Itau BBA and Santander were the bookrunners for the Rule 144A and Regulation S deal.

Banco Continental Paraguay priced $200 million of 8 7/8% notes due June 25, 2017 at par to yield 8 7/8% after being talked in the 9% area, a market source said.

Bank of America Merrill Lynch was the bookrunner for the Rule 144A and Regulation S notes.

Proceeds will be used for general corporate purposes and to fund medium- and long-term loans to customers.

Baghlan Group prints notes

Wednesday's deals followed the late-Tuesday pricing of Dubai-based Baghlan Group FZCO's $150 million issue of 14¾% notes due June 27, 2015 at 98.046, a market source said.

BNP Paribas was the bookrunner for the Regulation S notes, which include a change-of-control put at 102 and are callable from June 27, 2013.

The oil transportation company will use the proceeds for capital expenditures and for the acquisition of a 33.33% stake in Bahar Energy Ltd.

Bulgaria taps bookrunners

In other deal-related news on Wednesday, Bulgaria mandated BNP Paribas, HSBC and Raiffeisen Bank for a possible euro-denominated issue of notes that will be marketed during a roadshow, a market source said.

The roadshow will begin June 25 and travel from Vienna to Germany, Geneva and Zurich before wrapping up on June 28 in London.

The Regulation S offering will be launched subject to market conditions.

Turkey bonds in demand

The recent $1 billion tap of the Republic of Turkey's existing $1 billion 6% notes due January 2041 attracted $5.3 billion in orders from about 200 investors, a market source said.

The notes priced at 103.482 to yield 5¾%, or Treasuries plus 302 bps, via Deutsche Bank Securities, Goldman Sachs International and Morgan Stanley.

About 37% of the orders were from the United States, 25% from the United Kingdom, 13% from Europe, 21% from Turkey and 4% from others.

Funds accounted for 58%, banks and private banks 26%, insurance and pension funds 7% and hedge funds 9%.

Proceeds will be used for general financing purposes, which may include the repayment of debt, according to a filing with the Securities and Exchange Commission.

Turkey priced the original $1 billion 6% notes on Jan. 12, 2011.

Saudi bank deal oversubscribed

Also oversubscribed was the $800 million issue of 1.357% five-year sukuk notes from Saudi Arabia-based Islamic Development Bank.

The Regulation S notes - upsized from $750 million - priced at par to yield 1.357%, or mid-swaps plus 40 bps with bookrunners Barwa Bank, BNP Paribas, CIMB, HSBC, NCB Capital and Standard Chartered.

The final book was more than $900 million, with 70% of the orders from the Middle East and North Africa, 21% from Asia and 9% from Europe.

Central banks and agencies accounted for 55%, banks 35%, pension funds and insurance 6% and fund managers 4%.

Korea Exchange gets orders

The final book for Seoul-based Korea Exchange Bank's $700 million 3 1/8% five-year senior notes was $5.5 billion from 305 orders, a market source said.

The notes priced on Monday at 99.455 to yield 3.244%, or Treasuries plus 255 bps.

Bank of America, HSBC, ING, KEB Asia Finance, Citigroup and Morgan Stanley were bookrunners for the Rule 144A and Regulation S deal.

About 55% of the orders came from Asia, 28% from the US and 17% from Europe.

Funds placed 69% of the orders, banks 11%, insurers 9%, private banks 7% and others 4%.

Latin America 'subdued'

Looking to Latin American corporate issues, the tone was relaxed and somewhat subdued, the New York-based trader said.

"But there is decent Street volume going through, considering the tone," he said. "We basically managed to rally right into yesterday's close, with the strongest one-day gain we have seen since June 6."

Spreads on Brazil's Vale SA and Petroleo Brasileiro SA (Petrobras) improved.

"We saw many different corporates trade up with strong customer buy inquiry and activity," he said. "Today so far we see tighter spreads by a few bps, but once again, the Treasury moving lower keeps the dollar price on the bonds about the same."

Southern Copper Corp., which focuses on copper mining, smelting, refining and exploration in Peru, Mexico, Argentina, Chile and Ecuador, also tightened on Wednesday by about 8 bps, he said.

Middle East demand 'robust'

In other trading on Wednesday, longer-duration paper from Middle Eastern issuers continued to power along, the London trader said.

International Petroleum Investment Co.'s 2041 bonds were trading with a 114 handle, while Qatar's 2042 bonds were trading with a 117 handle, he said.

"Those are staggering moves, but again, the investment grade and crossover demand for these long-dated assets remains," he said.

He noted some profit taking for the Dubai sovereign, especially the 2014, 2015 and 2020 bonds.

"However, for the most part, demand remains robust," he said.

Dubai, Bahrain in focus

On Dubai's corporate side, Emaar Properties was lagging a bit, the London trader said.

"Granted it's nine or 10 points above par, but the bond looks OK versus the sovereign," he said. "Dubai Water and Electricity Authority's 2020s are really catching a bid now, almost 30 bps tighter on the week."

He's looking forward to Bahrain's planned $1.25 billion in bonds due in between seven and 10 years. Standard Chartered, JPMorgan, Gulf International Bank and Citigroup are the bookrunners for the deal, which started a roadshow on Wednesday.

"Some supply would be welcome," he said. "Ramadan is just around the corner, so the window remains open for a few weeks yet."

Aleesia Forni contributed to this article.

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