Active buying in emerging markets; CDS mostly tighter; issuance slows; Central European prices

By Christine Van Dusen and Paul A. Harris

Atlanta, Nov. 24 - Emerging markets were relatively quiet for new issuance Tuesday as investors were distracted by the upcoming Thanksgiving holiday and thought more about buying up bonds from the current supply already in the market, sources said.

"There wasn't much news today," a London-based trader said at the European close. "Emerging markets were trading a bit weaker."

In general, it was a "buy-fest," a New York-based market source said. "There were some pretty good inflows last week. I don't know if people are waiting for things to pull back. It's thin, and dealers are flat to short in the market, just trying to hold it down. There's just too much buying. It's just a simple inflow game at this stage of the year."

Five-year credit default swaps mostly tightened Tuesday, with China closing at 78.85 bps mid, 1.25 bps lower and Russia closing at 189.355 bps mid, 2.74 bps lower. Mexico ended the day 3.72 bps tighter at 137.985 bps mid, and Venezuela finished up at 1105.875 bps mid, 5.895 bps tighter.

In sovereigns, only Argentina saw a widening on Tuesday, closing at 944.35 bps mid, 1.065 bps wider.

Among corporates, OAO Gazprom closed at 237.725 bps mid, 3.155 bps tighter. And Russia's VTB Bank finished the day at 341.825 bps mid, 1.73 bps tighter.

The biggest primary news on Tuesday came from Poland's Central European Distribution Corp., issuing via CEDC Finance Corp. International Inc., which priced a $948.9 million equivalent two-part offering of seven-year senior unsecured notes, a market source said.

Meanwhile Croatia's Agrokor DD is roadshowing a €400 million offering of senior notes (expected B2//).

The Zagreb-based food and retail conglomerate plans to redeem its outstanding €150 million bonds at 101.75, Moody's Investors Service noted. Proceeds from the new issue would be used to repay a bridge loan maturing in July 2011.

Agrokor also renegotiated the covenant levels on its €246 million of bank debt, Moody's said, reducing the minimum coverage ratio to 3.0x from 3.75x and increasing the maximum leverage level to 3.75x from 3.5x. The new set of covenants will remain in place until maturity.

The transaction is viewed as "positive for the Agrokor credit and if executed as planned should lead to an improvement in Agrokor's liquidity position," according to a Moody's report.

Also on Tuesday, Sao Paulo, Brazil-based Banco Votorantim set out on a non-deal roadshow, according to an informed source.

Still on the radar screen: Russia's AK Bars Bank, which is planning to offer new 10¼% loan participation notes to investors for cash alongside an exchange offer for its existing 8¼% loan participation notes. That deal is expected to come next week, a London-based trader said. The company is based in Kazan, in the Republic of Tatarstan in Russia.

"AK Bars looks quite good," another market source said.

And Tatfondbank, a regional financial services company, is expected to "follow. Both are based in Tatarstan and have the security of Russia."

That issue won't likely raise a lot of interest, though, according to the London trader. "It's less liquid."

CEDC sells $948.9 million notes

Central European Distribution Inc. priced an upsized $948,898,000 equivalent two-part offering of seven-year senior secured notes (B1/B+/) on Tuesday, according to an informed source.

The Poland-based alcoholic beverage producer and distributor priced $380 million of 9 1/8% notes at 99.366 to yield 9¼%. The dollar-denominated notes priced on top of price talk.

In addition Central European priced €380 million of 8 7/8% notes at 99.361 to yield 9%, also on top of price talk.

Goldman Sachs & Co. was the left lead bookrunner for the transaction, the overall face amount of which was upsized from $870 million equivalent.

Citigroup and Deutsche Bank Securities were joint bookrunners.

Proceeds will be used to help fund the purchase of Lion Capital's remaining stake in Russian Alcohol Group and to repay debt, including Central European Distribution's outstanding secured notes due 2012. The additional proceeds will be used to repay short-term debt.

The issuer is a financing unit of Central European Distribution, an alcoholic beverage producer and distributor with corporate offices in Warsaw, Poland, and Bala Cynwyd, Pa.

Banco Votorantim on non-deal roadshow

Brazil's Banco Votorantim set out on a non-deal roadshow Tuesday, according to an informed source.

Bank of America Merrill Lynch is leading the roadshow.

Banco Votorantim is a Sao Paulo-based financial services company.

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