Emerging markets tone quiet but improved; Li & Fung, Colombia price; GOL unit plans notes

By Christine Van Dusen

Atlanta, July 12 - Never mind that investors are finally beginning to again favor risk or that there's a lot of cash ready to sop up new issuance or that Monday's tone was much stronger - the summertime slowdown for emerging market debt has begun, keeping the primary market sluggish and the secondary fairly quiet.

Though a government report showed that Britain's recession is worse than previously thought, market-watchers were encouraged by the news that the European Central Bank has slowed its buying of government bonds - a program that helped buoy Greece at the height of the sovereign's debt crisis - and may cease doing so altogether. This, sources say, suggests that Europe may be close to containing its debt crisis.

And yields on 10-year Treasuries barely moved, even after a not-so-great auction of three-year notes.

Still, only one issuer brought a deal to market on Monday. Colombia sold $500 million equivalent 7¾% global TES bonds due 2021, which priced at 107.424 to yield 6¾% via Bank of America Merrill Lynch and Deutsche Bank Securities. The notes - which are peso denominated but are payable in dollars - are a re-tap of the $800 million equivalent 7¾% global TES bonds due 2021 issued on April 14.

So while the overall tone on Monday was "OK," it was also "fairly quiet," a London-based trader said. "It's a summer Monday."

Colombia prices

The Colombia deal was keeping everyone "busy," a Connecticut-based market source said.

He also was keeping an eye on the $350 million issue of 5¼% notes due 2020 from Hong Kong-based trading and supply management company Li & Fung that priced late Friday at 103.852 to yield Treasuries plus 170 basis points. The notes are a re-tap of the $400 million 5¼% notes sold in May.

The London trader was tracking the $500 million 9 3/8% 10-year notes from Kuwait Projects Co. (Kipco), which priced last week at 99.204 to yield Treasuries plus 647 bps.

The issue was 3.6 times oversubscribed, with the order book closing at $1.8 billion. About 19% came from the United Kingdom, 26% from Switzerland, 7% from Europe, 19% from Asia, 9% from the Middle East and 20% from offshore U.S. accounts.

"The volatile market did not derail our efforts to access 10-year funding at a similar cost to previous successful bond offerings," Pinak Maitra, chief financial officer, said in a statement. "The transaction will allow us to refinance debt maturing next year and extend our credit curve to 2020."

As of late in the day in Europe, Kipco was trading at "98.80 bid, 99 offer," the London trader said. "It's stabilized but still below reoffer."

Another recent issue, the $612 million 5½% notes due 2020 from Brazil's BM&FBovespa - which priced at 99.635 to yield 5.548%, or Treasuries plus 250 bps - "traded very well, as high as 101.75 but closing at 101.3 bid, 101.5 offer," the Connecticut source said.

GOL plans notes

Also on Monday, Brazilian airline GOL Linhas Aereas Inteligentes moved forward with a planned dollar-denominated offering of notes due 2020 through subsidiary GOL Finance, according to a company filing.

The size of the deal - which could price this week - is expected to total between $200 million and $400 million.

Bank of America Merrill Lynch, Citigroup, Itau and BB Securities are the bookrunners for the notes.

Proceeds will be used to repay existing debt maturing in the next three years.

In other news, Russia is said to be considering a ruble-denominated eurobond.

And sources are whispering that South Korea's Woori Bank may sell bonds this month and that the Czech Republic has been considering a euro-denominated bond issue with Deutsche Bank, Barclays Capital and Ceska Sporitelna but may postpone until the fall.

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