Emerging markets stay quiet as investors take profits; inflows drop; Telmex, three others price

By Christine Van Dusen and Paul A. Harris

Atlanta, Nov. 5 - Emerging markets remained "extremely quiet" on Thursday as investors continued sifting through the raft of deals issued during October and kept an eye trained on the year-end, a market source said.

"Generally the market is moving north in tandem with equities, but it really is extremely quiet," the source said. "This week liquidity isn't as deep. It's much thinner. It feels more like the end of the year."

Investors are looking at their current positions and "not wanting to ramp up risk at this point in the year," according to a buy-side source. "That, together with the fact that risk markets over the past week and a half have been more volatile than they been in the past two months, leads to a general quiet time."

Emerging markets bond funds reported an outflow of $920,000 by mid-week - the first weekly outflow in about eight weeks, according to data service EPFR.

"This likely reflects a round of profit-taking and consolidation, and maybe some concern that things went too far too fast," said Brad Durham, managing director at EPFR.

Five-year credit default swaps mostly tightened on Thursday, following a Wednesday when widening was widespread across corporates and sovereigns at the European close.

Brazil's five-year CDS closed Thursday at 132.67 bps mid, 8.43 bps tighter. Russia closed at 188.805 bps, 9.595 bps tighter. Mexico closed at 162.835 bps, 7.08 bps tighter. Venezuela closed at 1.120.845 bps, 7.97 bps tighter.

Among the corporates, OAO Gazprom's five-year CDS ended the session at 249.38 bps mid, 8.82 bps tighter. And Russia's VTB Bank closed at 349.385 bps, 1.525 bps tighter.

Only Argentina saw a widening on Thursday, closing at 1,054.825 bps mid, 2.95 bps wider.

In Thursday's primary, four deals priced: Cairo-based African Export-Import Bank's $300 million of 8¾% bonds due Nov. 13, 2014, which came at 98.521 to yield 9 1/8%; British Columbia-based Pacific Rubiales Energy Corp.'s $450 million 7-year senior notes, which priced to yield 8.95%; Mexico City-based Telefonos de Mexico SAB de CV (Telmex)'s $500 million 5.5% notes due Nov. 11, 2019 which came at Treasuries plus 200 bps; and Jakarta, Indonesia-based PT Bumi Resources TBK's $300 million 12% notes, which price at par to yield 12%.

Telmex brings $500 million

Telmex priced $500 million 5.5% senior unsecured notes (A3/BBB+/A-) due Nov. 11, 2019 at 99.733 to yield Treasuries plus 200 bps or 5.535%, according to an informed market source.

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

Proceeds will be used for general corporate purposes.

Telmex is a Mexico City-based provider of fixed-line telecommunications services.

Pacific Rubiales prices $450 million

Pacific Rubiales Energy priced $450 million 8.75% notes at 99.09 due Nov. 10, 2016 to yield 8.95%, according to an informed market source.

The bookrunners for the Rule 144A and Regulation S deal are Bank of America Merrill Lynch and Citigroup.

The notes amortize in years five and six by 33.33% and in year seven by 33.34%.

Price talk started at 9% to 9.125% and was then revised to 8.875% to 9%.

"My personal view is that the deal would do a lot better if they did it at 9%," a New York-based investment banking source said ahead of the pricing.

Though based in British Columbia, Pacific Rubiales produces natural gas and heavy crude oil in Colombia, where it owns 100% of Meta Petroleum Ltd., a Colombian oil operator that runs the Rubiales and Piriri oil fields in the Llanos Basin in association with Ecopetrol SA, the Colombian national oil company.

Afrexim at 9 1/8%

African Export-Import Bank (Afrexim Bank) priced $300 million of 8¾% bonds (//BBB-) due Nov. 13, 2014 at 98.521 to yield 9 1/8%, according to a London-based market source.

Commerzbank, HSBC and Mitsubishi are the bookrunners for the medium-term notes.

The spread is 679 bps over Treasuries.

"The deal launched and priced in the same day, so there wasn't time for price talk," the source said.

Afrexim Bank is a Cairo-based financial institution.

Bumi prices $300 million

PT Bumi Resources TBK priced $300 million 12% notes (Ba3/BB/) at par or Treasuries plus 894.5 bps due Nov. 10, 2016 to yield 12%, according to a market source.

Credit Suisse and Deutsche Bank were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used to fund capital expenditures and eventual acquisitions, provide working capital and for general corporate purposes.

Bumi is a state-owned Indonesian electric utility, based in Jakarta.

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