Banorte, Cordoba, KUO price deals in busy LatAm primary; LatAm secondary weaker; Tauron does well

By Rebecca Melvin

New York, June 29 – In a burst of activity before financial markets are likely doused by vacation schedules surrounding the U.S. Fourth of July holiday, Latin American issuers priced three debt deals on Thursday for a combined $1.8 billion in new dollar-denominated paper.

The deals included $900 million in two tranches of perpetual notes by Mexico’s Banco Mercantil del Norte SA, $450 million of 5¼% 10-year notes by Mexico’s Grupo KUO SAB de CV and $450 million of 7 1/8% 10-year notes by Argentina’s Province of Cordoba.

Some of the new deals seemed to be doing well and “some seemed to be struggling,” a New York-based trader said of the new LatAm notes upon their release for secondary market trading.

“The Banorte stuff – the five- and 10-year – is doing well,” the trader said. But there was “a little bit of pressure [on Cordoba] and it was struggling around new issue price,” the trader said.

Demand may have been quenched by an abundance of Argentina issuance recently, the trader suggested.

“Its trading at reoffer. There has been a lot of Argentina paper in general and it was not priced that attractively,” the trader said.

Banorte priced an upsized $900 million of perpetual callable tier 1 capital notes, callable in five years and 10 years. The deal (Ba2/BB/) was initially talked at a total of $500 million.

The $350 million of Banorte notes callable after five years priced at par to yield 6 7/8% and the $550 million of non-call 10 notes priced at par to yield 7 5/8%.

Pricing came tighter than talk, which was in the mid 7% area for the shorter-dated notes and at 8¼% for the longer notes.

UBS and Morgan Stanley were joint bookrunners of the deal. Banorte is a lender based in Monterrey, Mexico.

Cordoba priced $450 million of 7 1/8% 10-year notes (B3+/B/) at a reoffer price of 99.991 to yield 7 1/8%. The notes’ coupon and initial yield matched despite the below-par reoffer price because of the length of time to the first coupon.

Pricing of the Rule 144A and Regulation S deal by HSBC and J.P. Morgan came tighter than the talked coupon in the 7 3/8% area.

Grupo KUO, a Mexico City-based chemical, automotive and food conglomerate, priced $450 million of 5¼% 10-year notes (/BB/BB) at par. The notes had been talked in the high 5% area.

Proceeds of the notes are being used to refinance the issuer’s $325 million of senior notes due 2022.

The new notes are non-callable for five years.

Bank of America Merrill Lynch and Credit Suisse were bookrunners for the Rule 144A and Regulation S deal.

LatAm a little weaker

Overall the Latin America market was a little weaker, especially as commodities started to sell off into the market close.

“Commodities were okay, but now they are rolling over,” a trader said shortly before the market close.

Earlier they were helping. “Oil strength is helping it hold in. But we’ve seen a little bit of pressure. Given that other risk markets like equities are under pressure, we are holding in fine,” a trader said.

Meanwhile volatility in rates in a global government bond selloff was having a slight knock on effect, but not overly so in Latin America, the trader said.

Among secondary markets, Brazil was seen weaker by about ¾ point with a lot of pressure overall on risk assets, the trader said.

Trading in the bonds of Venezuela and its state-owned oil company Petroleos de Venezuela SA was active, another trader said.

A higher-than-usual for the summer volume of $97 million of Venezuela bonds traded as tracked by Trace data, said a second trader, based in Connecticut.

Europe rattled by rate moves

Earlier in Europe, the Middle East and Africa, the moves in rates was having a more pronounced impact on emerging markets, a London-based strategist said.

“That is most of the focus and not really deals,” the strategist said.

But among deals priced on Thursday ahead of a summer weekend was Tauron Polska Energia SA’s €500 million of 10-year 2 3/8% senior notes, which came at a reoffer price of 99.438 to yield 2.44%.

The new Tauron notes “did well” and tightened about 15 basis points versus German Bunds, a trader said.

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