Empresas Publicas de Medellin, Unibanco price on mixed day for EM; Russian assets firm

By Christine Van Dusen

Atlanta, Jan. 24 - Volumes remained thinner on Monday as emerging markets investors digested new issues from Colombia's Empresas Publicas de Medellin ESP and Brazil's Itau Unibanco Holding SA and watched the new issue pipeline continue to fill up with expected deals from Indonesia's PT Bakrie Telecom Tbk., China's Zhong An Real Estate Ltd. and BBVA Paraguay.

And though a terrorist bombing of an airport in Russia rattled nerves, the impact on the sovereign's assets was contained and risk appetite, overall, remained fairly healthy.

"EM assets kicked off the week with a mixed tone," according to a report from RBC Capital Markets.

Said a London-based trader: "It's quiet and firm with volumes below average."

The JPMorgan Emerging Markets Bond Index Plus was 3 basis points tighter by mid-afternoon and finished the day narrower by 4 bps.

"We're seeing some of the higher-beta names outperform, like Argentina and Venezuela, to a certain extent," said Nick Chamie, head of emerging markets research for RBC Capital Markets.

According to Gavan Nolan, an analyst with Markit, "it was another positive session for risky assets, and credit in particular."

Even Russia saw its five-year credit default swaps tighten, by about 3 bps, and its currency rise about 0.2%.

"While Russian equities may remain biased weaker near term, we would not expect the bombing itself to have a deep or lasting impact," RBC said in its report.

EPM sells notes

Colombia-based public services company Empresas Publicas de Medellin ESP priced COP 1.25 trillion 8 3/8% notes due Feb. 1, 2021 at 99.179 to yield 8½%, a market source said.

Bank of America Merrill Lynch and Barclays Capital were the bookrunners for the Rule 144A and Regulation S notes, which are payable in dollars.

Proceeds will be used for general corporate purposes.

Itau Unibanco prices

Brazil's Itau Unibanco Holding (Cayman Islands Branch) priced a $250 million add-on to its 5¾% notes due Jan. 22, 2021 (Baa2//BBB-) at 97.353 to yield 6.108%, or Treasuries plus 270 bps, a market source said.

Deutsche Bank, Itau and Morgan Stanley were the bookrunners for the Rule 144A and Regulation S deal.

The original issue totaled $1 billion and priced Sept. 16 at 99.886 to yield 5.766%, or Treasuries plus 300 bps.

Itau Unibanco is a lender based in Sao Paulo.

This followed the late Thursday pricing of Philippines-based food and beverage company subsidiary SMC Global Power Holdings Corp.'s $300 million notes due 2016 at par to yield 7%, a market source said.

ANZ, HSBC and Standard Chartered were the bookrunners for the Regulation S deal.

Proceeds will be used for financing investments in power-related assets and financing payment or prepayment to state-run Power Sector Assets and Liabilities Management Corp. for payment obligations of subsidiaries.

Bakrie, others move forward

Adding to the already clogged pipeline of upcoming deals, Indonesia-based telecommunications company PT Bakrie Telecom plans to issue a $130 million tap of its 11½% notes due 2015, a market source said.

Credit Suisse and Morgan Stanley are the bookrunners for the deal, which could price Tuesday.

Proceeds will be used to refinance a $30 million bank loan and $50 million in equipment vendor payables. Any remaining proceeds will be used to fund the company's future capital expenditures.

The original Rule 144A issue totaled $250 million with an 11½% coupon and a price of par.

Also from the telecom sector, Russia-based VimpelCom set the tenor for its planned dollar-denominated benchmark-sized offering of notes at five and 10 years, a market source said.

Barclays Capital, BNP Paribas, Citigroup and RBS are the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used for general corporate purposes, which may include funding related to the $6.5 billion merger of VimpelCom with Wind Telecom (formerly Weather Investments SpA).

BBVA Paraguay plans notes

Turkey-based lender Turkiye Is Bankasi AS (Isbank) talked its five-year dollar-denominated benchmark notes at a yield in the 5.35% area, a market source said.

JPMorgan, RBS, Standard Bank and Standard Chartered were the bookrunners for the Rule 144A and Regulation S deal.

And lender Banco Bilbao Vizcaya Argentaria Paraguay SA (BBVA Paraguay) has tapped Citigroup and BBVA as bookrunners for an offering of dollar-denominated bonds, a market source said.

Proceeds from the Rule 144A and Regulation S transaction will be used for general corporate purposes.

Zhong An taps bookrunners

In another upcoming deal, China-based property developer Zhong An Real Estate has planned a roadshow for a three-year offering of renminbi-denominated notes, a market source said.

The marketing trip was scheduled to start on or around Monday via bookrunners Barclays Capital and UBS.

The Regulation S notes will be payable in dollars.

Proceeds will be used for general corporate purposes and to fund acquisitions of land projects.

The deal could price as soon as this week.

"There's significant demand in the market for debt, but also a huge pipeline of issuers waiting to come to market," Chamie said.

Sovereigns docile

Driving the rally for EM assets, Nolan said in a report, is a "relative docility" in sovereigns.

Volatile names like Tunisia, Egypt and Lebanon saw better buyers, with most prices up between a half-point and 1½ points, a London-based trader said.

Egypt's 5¾% 2020 notes - which closed Friday at 100 bid, 100.50 offered - finished Monday at 100.25 bid, 101 offered.

"We've seen better buyers on Qatar, Qtel International and Qatari Diar paper, with spreads generally slightly tighter," he said.

Sukuks get support

Another Middle Eastern credit, Abu Dhabi National Energy Co., saw its 5.62% 2012 paper trading Monday at 104.87 bid, 105.12 offered after trading Friday at 104.75 bid, 105.25 offered.

The corporate's 7¼% 2018s - which ended Friday at 112.12 bid, 112.62 offered - finished Monday unchanged.

Meanwhile, the region remained quiet on the issuance side, though the market was still keeping an eye out for Dubai-based developer Emaar Properties' planned $2 billion sukuk issue of notes via HSBC, Royal Bank of Scotland and Standard Chartered.

"They're on the road presently," the London trader said, noting that there remains good support for sukuks.

Small inflows

In other news, emerging markets bond funds saw inflows of just $143 million for the week ended Jan. 19, according to data tracker EPFR Global.

Flows into local currency funds helped offset outflows from hard and blended currency funds.

The week before, the funds took in $625 million.

"The issue of the moment seems to be inflation," said Cameron Brandt, senior analyst with EPFR. "It's a concern in three of the bigger EM bond fund country allocations - Brazil, Russia and Turkey - and some high-profile pundits and managers have been urging caution regarding EM debt in recent weeks until the policy responses become clearer."

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