Brazil's USJ, Kazakhstan's Zhaikmunai sell bonds ahead of U.S. election, key Greek vote

By Christine Van Dusen

Atlanta, Nov. 5 - Brazil's Usina Sao Joao Acucar e Alcool SA (USJ) and Kazakhstan's Zhaikmunai LP priced notes on Monday as investors focused on the upcoming U.S. presidential election and votes in Greece that could impact the sovereign's financial future.

The day saw market-watchers speculating on what impact a Republican or Democratic win would mean for risky assets. And many eyes were on Greece's parliament, which will soon hold key votes on austerity measures, the budget and labor reforms.

"The trading weeks of the year are rapidly dwindling, if one takes into account Thanksgiving, Christmas, National Days in the UAE during the first week of December," the London trader said. "Throw in a U.S. holiday next Monday, and the 2013 calendars will be arriving before we know it."

Meanwhile, a few emerging markets issuers mulled deals, including Republic of Latvia, China's Alibaba Group and China's Far East Consortium International Ltd.

In its new deal, Brazil-based sugar and ethanol producer USJ sold $275 million 9 7/8% notes due Nov. 9, 2019 at 98.768 to yield 10 1/8% after being talked in the mid-10% area.

Credit Suisse, HSBC and Itau BBA were the bookrunners for the Rule 144A and Regulation S notes.

And Kazakhstan-based oil and gas production company Zhaikmunai priced $560 million notes due in 2019 with a 7 1/8% coupon, according to a company news release.

Bank of America Merrill Lynch, Citigroup and VTB Capital were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds from the deal will be used to refinance existing debt, to lengthen the company's debt maturity profile, to reduce the interest rate on the group's long-term debt and for general corporate purposes.

"Still, the market awaits some meaningful supply," said a London-based trader.

Poland prices samurai notes

Friday saw Poland sell ¥66 billion of notes in tranches due Nov. 8, 2017 and 2027 via bookrunners Nomura and SMBC Nikko, according to an announcement from the sovereign's Ministry of Finance.

The deal included ¥56 billion 1.05% notes due 2017 that priced at par. The second tranche, due 2027, came to the market at par with a 2½% coupon.

"The bonds have been allocated mainly to Japanese institutional investors such as banks, insurance companies, funds and public institutions," the Finance Ministry said.

Foreign investors currently hold more than 50% of Polish debt, according to a report from Erste Group Research.

"The increasing interest from the side of foreign investors was one of the reasons that yields have been steadily dropping recently," the report said. "Another factor affecting yields is monetary easing. We believe it is mostly priced in now and we expect yields to stabilize at current levels and 10-year yields to settle around 4.6% at the end of the year."

Latvia mandates

For its planned issue of bonds, Latvia has mandated Barclays, Deutsche Bank and JPMorgan, a market source said.

And China's Alibaba Group - an e-commerce group based in Hangzhou and best known for buying back a stake from Yahoo! - is planning an issue of at least $1 billion of notes, according to a filing with the Securities and Exchange Commission.

Also from China, business conglomerate Far East Consortium International is planning a roadshow for an issue of dollar bonds, according to a company announcement.

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

Qatar bonds unchanged

Most bonds from Qatar were unchanged on Monday, a London-based trader said.

"The long end, of course, is still in demand," he said. "There's still limited paper on Abu Dhabi National Energy Co.'s (TAQA) 2036 dollar notes around and International Petroleum Investment Co.'s 2041s saw late-in-the-day demand for IPIC's 2017s and TAQA's 2017s."

In recent weeks the Qatar sovereign's 2042s have inched 50 cents to 75 cents higher.

"They feel well-anchored," he said.

Dubai issues see support

Some two-way activity was noted for paper from issuers in Dubai.

"Today Dubai's 2017s and 2022s and Emaar Properties and Majid al Futtaim Holdings actually traded lower and down," he said. "Many from this space are off their highs."

The 2017 notes from First Gulf Bank PJSC were well-supported as the lender's 2012s were poised to come due, a trader said.

"Mubadala today announced the consent solicitation process, asking permission to change a clause in its bond contracts to delink the risk of default of subsidiaries from the main company," he said. "Mubadala's 2021s have had a very solid bid for some time now, and they close 25 bps on the month on the bid side."

Light pace for African bonds

From Africa, African Export-Import Bank's 2014s saw some light trading on Monday, a trader said.

"Angola and Nigeria are doing very well on the sovereign side," he said. "There was small interest in Zambia, late."

The 2017 bonds from South Africa-based Investec Ltd. attracted the attention of retail investors, a trader said.

"South Africa's 2041s were choppy, but closing firmly bid," he said.

Interest noted for Kiev

Looking at bonds from Ukraine, most names have been quiet lately, with some slight gains in the sovereign and liquid corporates, said Svitlana Rusakova of Dragon Capital.

Ukraine's 2017s were seen moving as high as 110 bid, 111 offered but have been hovering closer to 109.75 bid, 110.25 offered. And the sovereign's 2020s and 2021s remain squeezed, she said.

"We also saw some interest in City of Kiev issues," she said.

Turkey gets an upgrade

Bank bonds from Turkey were in focus on Monday after Fitch Ratings upgraded the sovereign to BBB- from BB+, a London-based analyst said.

"Although this sovereign upgrade by Fitch does not come as a surprise to us, it was not a given," she said. "The ability of the banks to access capital markets will further strengthen."

Her top picks are Turkiye Is Bankasi AS' (Isbank) 2022s, Turkiye Garanti Bankasi's (GarantiBank) 2021s and Halk Bankasi's (Halkbank) 2017s.

"We also prefer Isbank 2017s over (AkBank TAS) 2017s, offering a pick-up of 20 bps and lower cash price," she said. "We like Yapi Kredi's 2017s, which will be supported by a potential Tier 2 issuance and capital improvement."

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