Venezuela prices $4.99 billion; Russia 2030 sees huge rally despite looming $17.8 billion supply

By Paul A. Harris

St. Louis, Oct. 6 - Emerging markets debt continued to rally on Tuesday, sources said.

The EMBI-plus index was 11 basis points tighter from Monday at 311 bps bid at the close of the New York session, improved from the previous day's 322 bps bid, according to a portfolio manager.

The new issue market remained active, with Venezuela pricing $4.992 billion, and Kuwaiti investment holding company Kipco selling $500 million.

And despite headline stories heralding an expected $17.8 billion of new supply out of The Russian Federation, in 2010, Russia's benchmark global bonds rallied, according to a London-based trader.

Venezuela upsizes

Venezuela announced that it priced a total of $4.992 billion of the bonds on Tuesday.

The action included $2.496 billion of 7¾% bonds due Oct. 13, 2019 and $2.496 billion of 8¼% bonds due Oct. 13, 2024. Both came at 140.

As previously reported, Venezuela received demand for $19.4 billion of the bonds, exceeding the planned $3 billion issuance amount.

Deutsche Bank and Citigroup are the bookrunners for the Regulation S deal.

Despite the fact that the deal targeted local investors, chiefly as a means for them to get into dollar-denominated assets, it was hugely oversubscribed, sources said.

Kipco prices $500 million

Also on Tuesday, Kuwait Projects Co. (Cayman) priced a $500 million issue (Baa1/BBB+) of 8 7/8% seven-year notes at 98.725 to yield 9 ¼% on Tuesday, according to a market source.

The yield printed at the wide end of the 9 1/8% to 9¼% price talk.

BNP Paribas, Goldman Sachs & Co. and JP Morgan ran the books for the Regulation S deal.

Kipco is an investment holding company based in Kuwait City, Kuwait.

The $500 million deal played to more than $3.25 billion of orders, a market source said.

Russia plans $17.8 billion for 2010

Headline news that Russia will begin a roadshow in November for $17.8 billion of global bonds, which it intends to sell next year, did nothing to hurt its asset prices, according to a London-based trader who focuses on the sovereign credit.

"We didn't react to this news," the trader remarked.

"As a matter of fact we tightened very sharply, today," added the source, who spoke just after the European close.

Russia's 7½% global bonds which mature in March 2030 finished Tuesday at 225 bps bid, 50 bps tighter over the past two days, said the trader, who characterized it as a huge move.

On a price basis, the Russia 2030 went out Tuesday at 113¼ bid, 113½ offered.

Corporates also rode the tailwind of the rallying market, the trader said.

OAO Gazprom credit default swaps were at 247 bps bid, 252 bps offered, 27 bps tighter on the day.

The broad market was very strong, the trader said.

"But the Russia '30 outperformed everything."

Adaro sets structure and timing

From the world of Asian high-yield corporate paper, Indonesia's PT Adaro Energy Tbk./PT Adaro Indonesia announced timing and structure on its new bond deal, on Tuesday.

Adaro will start a roadshow on Wednesday in Hong Kong for its benchmark-sized dollar-denominated 10-year senior guaranteed notes (Ba1//BB+).

The roadshow wraps up on Oct. 15 in Boston.

Pricing is expected next week.

Credit Suisse, Deutsche Bank Securities and UBS AG are joint bookrunners for the Rule 144A and Regulation S sale, which will be issued through PT Adaro Indonesia and guaranteed by PT Adaro Energy. OCBC Bank is a joint lead manager.

The notes will come with five years of call protection.

Proceeds will be used for capital expenditures and for general corporate purposes.

The prospective issuer is a Jakarta, Indonesia, coal mining company.

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