Durango launches $520 million, as calendar grows by 13 deals; quiet session sees Brazil, Mexico firmer

By Paul Deckelman and Aaron Hochman-Zimmerman

New York, July 9 - Trailing what had essentially been a five-day holiday period for many emerging markets players, the Monday session saw a dramatic buildup of the new deal calendar.

Mexico's Corporacion Durango led a parade of prospective corporate issuers as it announced an expected $520 million offering of senior unsecured paper (/B+/B+) in two tranches.

Meanwhile in the secondary market, amid lackluster trading, the bonds of Mexico and Brazil firmed while Philippines paper traded off.

A post-holiday pop

The primary market saw over $1 billion of new issuance on Monday as players resumed their places trailing what for many had been an extended recess following the July 4 Independence Day holiday in the United States.

A total of 13 prospective issuers stepped up with new offerings, with six new deal announcements from the Middle East alone.

An emerging markets syndicate official in the United States warned that Monday's burst of primary market activity may just be pent up demand after the slowdown which had taken place in the run up to the July 4 break, and not a signal of a much improved market.

"People knew last week was going to be a dead week," the source said.

"They knew that if they put a deal on hold it would not the end of the world."

A buy-side source said that during the July 4 week interest rates took center stage.

This week, however, investors will mainly focus on rising bond yields, indicators of global growth and the rising price of oil.

Saudi, Peruvian issuers price deals

In new deal activity Monday, Dar Al-Arkan Real Estate priced $1 billion of five-year notes at par to yield Libor plus 225 basis points.

ABC Islamic Bank, Arab National Bank, Deutsche Bank AG, Dubai Islamic Bank,

Gulf International Bank, Kuwait Finance House Malaysia and Unicorn Investment Bank were the joint leads.

Meanwhile, Lima Airport priced a $165 million 15-year secured amortizing issue at 81.878 with a coupon of 6.88%.

Merrill Lynch was the bookrunner for the Rule 144A and Regulation S deal.

Egypt eyes sovereign market

The Arab Republic of Egypt will be on the road with a local-currency offering expected to price Thursday.

The Egyptian pound-linked eurobonds (B1/B+) will settle in dollars.

JP Morgan has the books.

From the corporate sphere

Mexican issuer Corporacion Durango announced a senior unsecured issue (B+/B+) expected to be worth $520 million.

The first tranche will be five-year amortizing notes.

The accompanying tranche will be 10-year notes, non-callable for five years with no amortization.

Merrill Lynch has the books.

While others were bringing new deals, Argentina's Edenor SA cut its offer of 10-year senior unsecured notes (B2/B) to $220 million from $250 million.

Those bonds are non-callable for five-years.

Citigroup and Deutsche Bank are running the books.

Investors are expecting a pricing on July 18 after a roadshow that began Monday in London, stays in the City for a second day Tuesday, on Wednesday and Thursday moves to the U.S. west coast, and wraps up on July 12 through July 17 on the U.S. east coast.

Ukraine's Industrial Union of Donbass (ISD) announced plans to release new dollar-dominated bonds (B1/B+).

JP Morgan will act as the bookrunner.

Pricing for the deal is expected late in the week of July 16.

Fellow manufacturer, Ukraine's Interpipe Ltd. announced plans to sell a $150 million three-year senior issue (B+/B+).

Asian deals join queue

In the quasi-sovereign sphere, South Korea's SK Telecom is planning a new dollar-dominated issue (A2/A).

Merrill Lynch, Morgan Stanley and Credit Suisse are leading.

Meanwhile Singapore's Olam International Ltd. released talk of one-year swaps plus 65 basis points for its upcoming local-currency one-year issue.

Deutsche Bank Singapore is the bookrunner for the deal.

Olam is a global integrated supply chain manager of agricultural products and food ingredients.

Offerings from the banks

News also surfaced from the banking and financial services sector.

Russia's Transcapitalbank set talk of 10¼% to 10½% for its $100 million offering 10-year subordinated lower tier II notes (B2).

ABN Amro and Credit Suisse are running the books.

The bank its debut loan participation notes issue in May of 2007. It came with a yield of 9 1/8%.

A market source told Prospect News that compared to the outstanding notes the new offering looks very attractive.

The source added that the premium to the fair yield for a five-year bond, calculated to the next call date, is around 100 bps, the source said.

"I guess that the book will therefore grow very fast," the source added.

ABN Amro and ING have the books for the Transcapitalbank deal which is expected to close on July 25.

Elsewhere state-run Banco do Brasil is coming with a benchmark-sized offering of local-currency 10-year senior unsecured bonds (Baa3 expected).

BB Securities and Merrill Lynch are mandated as bookrunners for the Rule 144A and Regulaion S deal.

Pricing is expected the week of July 9.

Bank of St. Petersburg will roadshow its dollar-dominated issue (Ba3) through Wednesday, via UBS and JP Morgan.

Ukraine's UkrSibbank unveiled a dollar-dominated offering of three-year senior bonds (Ba2/BB-) via HSBCand BNP Paribas.

Qatar Real Estate Investment Co. plans to issue a five-year floating-rate sukuk (A2/BBB+). HSBC is the bookrunner.

Middle Eastern financial sector

Four Middle Eastern financial institutions each unveiled plans for five-year notes offers.

Kuwait's National Industries Group announced a dollar-dominated five-year floating rate senior unsecured sukuk (Baa2);

Pricing is expected sometime next week.

Meanwhile Bahrain's Ithmaar Bank plans to release a new dollar-dominated five-year issue (BBB-), via UBS.

Also from Bahrain, Gulf Financial House announced its plans to sell dollar-dominated five-year floating rate notes (BBB-) via Dresdner Kleinwort and HSBC.

And finally United Arab Emirates' First Gulf Bank plans to sell five-year floating-rate notes (A2/A).

Citigroup, Deutsche Bank and Standard Chartered are the bookrunners.

A tired secondary

In the secondary market, EM bonds were seen having firmed a little, although on relatively restrained trading, with markets in several important countries closed for holidays. They were said to be taking their cues from U.S. equities, which extended their July rally on news of share buybacks and expectations of better company earnings.

Another factor was U.S. Treasuries, whose prices gained while yields declined, aided by investor belief that the subprime lending crisis will continue to act as a drag on economic growth, keeping inflation under control.

The yield on the Treasury's benchmark 10-year notes contracted by about 3 basis points on Monday, to 5.15% - a welcome change in the eyes of fixed-income investors from last week, when those yields fattened about 15 bps on stronger-than-expected U.S. economic data, the biggest rise in more than a year.

With Treasury yields declining, the widely followed EMBI+ index compiled by JP Morgan & Co., which gauges the market's appetite for additional risk by tracking spreads over Treasuries of EM debt generally and that of specific countries, was seen having widened about 1 or 2 bps to the 162-163 bp level.

Mexico, Brazil firmer

A trader in Latin American issues said that from where he sat, "not one exciting thing happened today. [There was] a lack of inquiry, a lack of anything."

He said that "people were tired of things," and added that "the long weekend and the holiday" last week had just added to the lassitude.

Additionally, there were holidays Monday in Argentina, which was celebrating its Independence Day, and in the Brazilian state of Sao Paulo, the country's richest and most economically important subdivision, which effectively closed all of the markets there.

He said nothing had really stood out, although he saw Venezuela's bonds "a little better bid" and said that the bonds of Brazil, Argentina and Mexico closed "almost unchanged on their dollar price from the previous day."

With Brazil's local markets shuttered, the country's 11% bonds due 2040, thought to be the most liquid and widely-traded emerging bond, was seen at other desks as having firmed a little.

One market source saw the bonds up as much as half a point on the day, to the 131.15 level, while another saw the bonds only up 3/16, to the 131.125 area. The yield on the bonds was meantime quoted down 7 bps, to 6.07%.

Inflation data lifts Mexico

Mexico's bonds got a boost from the news that inflation in June was in line with most expectations, at an annual 3.98% rate, up slightly from May's 3.95%, but below the central bank's 4% target and about what economists were generally expecting.

With that relatively benign number in the market, the yield on Mexico's benchmark local bonds due 2015 came down 1 bp to 7.69%, while its 10% bonds due 2036 likewise tightened by 1 bp to 7.74%, and its price rose nearly ¼ point to just under 126.25

Ecuador's volatile bonds - which have gyrated on repeated speculation that the country won't keep up its debt service, most recently last week on remarks by populist president Rafael Correa - rose smartly in the early going, riding the momentum seen Friday, when those bonds posted sizable gains.

However, by day's end, those gains had been about chopped in half, with the price on its benchmark 10% bonds due 2030 up about 1/3 point on the day to the 83 mark, while the bonds' yield came in by about 6 bps to 12.27%.

Asia on the defensive

Earlier in the day in Asian trading, investors were on the defensive, worried about the impact of stronger U.S. economic figures reported on Friday; those figures stoked concerns that the Federal Reserve will dash market hopes for a possible rate cut later in the year.

That pushed prices on Philippines sovereign issues down about ½ point, its benchmark 2031 bonds easing to 110 and its 2032s backpedaling to 95.5.

The 5-year credit default swaps contract based on those bonds, however, firmed a little, to a spread of 108-114 bps, in about 2 bps from Friday's 110 bps.

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