Israel sells bonds amid better liquidity; CLP Power, Georgian Railway look to issue notes

By Christine Van Dusen and Aleesia Forni

Atlanta, May 31 - The State of Israel sold notes as emerging markets assets - showing improved liquidity and tighter spreads - continued to outperform their peers and investors showed cautious optimism about Europe's ongoing debt crisis but concern about the United States' weaker jobs data.

"EM is opening with a more positive tone," a London-based market source said.

The Markit iTraxx SovX index spread was 5 basis points tighter.

"Street liquidity is also showing an improvement from yesterday, as the market anticipates some formal response to the European conundrum," she said.

Still, risk aversion remained as investors watched Greece and wondered whether the sovereign will stay in the euro.

"The glacial pace at which euro area policymakers are addressing their respective banking sectors and growth issues, along with the continued risk of an anti-bailout outcome in Greece, will likely keep risky assets under pressure for the coming weeks," according to a report from Barclays Capital. "We think rationality will prevail and Greece will remain in the euro area in the near term. The costs of an immediate Greek exit are still too high for either Greece or the euro area. However, a disorderly exit cannot be ruled out."

Some investors are finding solace in the news that European Union leaders may use the European Stability Mechanism to recapitalize banks.

"EM, along with other credit markets, had a quick look into the abyss yesterday afternoon, decided it was not pretty, and today have chosen to put their faith in the ability of our leaders to do something constructive," a London-based trader said.

Emerging market bonds continued to put in an impressive performance, he said.

"While Argentina and Venezuela are off 10 points, we are still talking about 20 bps to 100 bps moves," he said.

Middle East flows balanced

Bonds from the Middle East saw mostly balanced flows on Thursday, a trader said.

"The region is growing well, Dubai is slowing knocking refinancing risk on the head and petro dollars are being spent to sustain the youthful population's aspirations," he said. "But likewise, on the flipside, the oil chart looks poor, the world is obviously for sale and this space might at some point be a victim of its own success as cash prices continue to hold in well."

For the month of May, the best performer from the region was Dar Al-Arkan's 2015 notes, which now trade with a 102 handle, he said. The laggard of the month was Dubai Holdings and its 2014 euro notes.

"Given the general tone towards Dubai names at the moment, it is perhaps a little surprising," he said.

IPIC trades up

Also on Thursday, Saudi Electricity Co.'s 2017 bonds were seen at 100.50 bid, 100.75 offered after trading Wednesday at 100.75 bid, 101.10 offered.

Abu Dhabi-based International Petroleum Co.'s 2022 bonds were trading at 105.62 bid, 106.12 offered after being quoted at 102.12 bid, 102.62 offered last week. The company's 2041 bonds - which were seen last week at 107.50 bid, 108.50 offered - were quoted Thursday at 107.75 bid, 108.75 offered.

In other trading, South Africa's five-year credit default swaps were trading at 195 bid, 200 offered.

"There have also been some decent moves for Safra Group and Eskom for the month," a trader said.

On Thursday, Safra's 2016 dollar notes were trading at 101.50 bid, 102.25 offered. Eskom's 2021 bonds were seen at 103.43 bid, 104.18 offered.

CLP Power plans notes

CLP Power Hong Kong Financing Ltd. is planning a $3.5 billion medium-term note program with bookrunner HSBC, according to a company filing.

The company expects to issue notes in the next 12 months.

The notes are guaranteed by CLP Power Hong Kong Ltd., a Hong Kong-based electric company.

Calik 'on the sidelines'

Turkey's Calik Holding AS was in the news on Thursday as the Istanbul-based industrial conglomerate considered a bid for its ATV news channel from Time Warner Inc.

"There is no detail as to the potential value of the deal," a London-based analyst said. "Sale at a price at or above book value would be positive for the credit, which has been trying to sell this asset for a while now."

The company still plans to issue dollar-denominated notes via Citigroup and Deutsche Bank in a Rule 144A and Regulation S deal. The notes were marketed during a roadshow that ended May 15.

For now, Calik is "waiting on the sidelines to issue a new bond," she said.

Taking a look at the Turkey sovereign, five-year credit default swaps spreads started Thursday 5 bps tighter.

"Cash bonds are opening little changed," she said.

Georgian Railway mulls deal

Market-watchers were also talking about Georgia on Thursday, as Georgian Railway LLC pondered a 10-year issue of bonds.

"The company currently has $250 million five-year bonds outstanding, which are very illiquid and yield 7¼%," the analyst said. "This comes as a second option after the failed IPO and is line with the recent effort from the Georgian government to raise investor awareness of their country and encourage local corporates to tap the capital markets."

Also part of this initiative is JSC Bank of Georgia, which marketed a dollar-denominated offering during a roadshow from May 17 to May 22.

Bank of America Merrill Lynch, Credit Suisse and JPMorgan are the bookrunners for the Rule 144A and Regulation S deal.

"It has gone quiet since [the roadshow], given the current market conditions," she said. "These are credits in a region that gives investors an alternative source of assets with attached exclusivity to it, given the infrequent issuance. The only imminent risk, which applies more directly to the state-owned entities, are the elections in 2013."

Hutchison Whampoa tightens

The recent issue from Hong Kong-based business conglomerate Hutchison Whampoa Ltd. was seen "about 10 bps tighter," according to a trader.

The tranche of €750 million 3 5/8% 10-year notes was seen at 226 bid, 222 offered late in New York's session. The notes priced on Wednesday at 99.95 to yield mid-swaps plus 190 bps, or 3.361%.

In other deal-related news, BRF Brasil Foods SA set the deal size at $500 million for its planned offering of 10-year notes, a Connecticut-based trader said.

"It looks cheap," he said, adding that the deal will probably trade around "a quarter and a half higher ... There's been very little grey market activity... around plus 1/8."

The source had not seen any trades near the end of the session.

BB Securities, HSBC, Itau BBA and Santander are the bookrunners for the Rule 144A and Regulation S deal. A roadshow ended Tuesday.

Israel prices floaters

In its new deal, Israel priced $200 million floating-rate notes due 2014 with an interest rate of Libor plus 90 bps, according to a term sheet.

The issue price is par.

The notes were issued under the sovereign's €7 billion euro medium-term note program.

Barclays Bank plc is the dealer.

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