Brazil’s 10-year euro-denominated bond that was issued yesterday surprised the markets by being much smaller than expected.
The deal, at E500 million, was half the size than was originally expected. Bankers say that aggressive pricing put some investors off. Brazil only attracted E700 million of orders from about 180 mostly retail accounts.
On the plus side, the transaction, which was lead managed by BNP Paribas and Deutsche Bank, at least demonstrated that Brazil has an alternative to the dollar market to raise funds. In recent weeks, investors have reduced their exposure to dollar-denominated Brazil debt at a time when the sovereign’s spreads have hit historically tight levels.
Elsewhere in Latin America, Ecuador's government officials have indicated their intention to issue a private five-year placement in the next two-to-three weeks. The deal, which could raise up to $275 million, would be the sovereign’s first in the international capital markets since 1999.
In a trip to New York this week, President Lucio Gutierrez also suggested that Ecuador hoped to exchange $1.25 billion worth of 12% 2012 bonds for new paper with a longer duration and carrying a lower coupon.
In Russia, two state-owned banks will break new ground later this month when they will sell the first ever international subordinated bonds from the country. Vneshtorgbank (VTB) and Sberbank will raise lower tier-two capital.
The VTB deal could pave the way to its eventual privatisation. The EBRD has long been expected to take a stake in it but no deal has emerged yet. Subordinated debt serves as a quasi-debt and a quasi-stock instrument. This structure could prepare VTB for a potential listing. Four banks – Barclays Capital, Deutsche Bank, HSBC and JP Morgan – will lead manage the likely $300 million deal. Sberbank’s issue will be arranged by UBS and is likely to raise $500 million.
Russian corporates are also taking advantage of investor demand. Diamond producer Alrosa sold a $200 million tap yesterday. Home Credit & Finance Bank (HCFB) and mobile phone operator MTS are expected to price deals today.
HCFB is expected to sell a $150 million, three-year deal through Citigroup, while CSFB and Goldman Sachs will lead manage MTS’s $500 million, seven-year issue.