Korea Finance picks bookrunners; Telefonica Moviles postpones; Lat-Am corporates widen

By Christine Van Dusen

Atlanta, Aug. 15 - Korea Finance Corp. mandated bookrunners for a dollar-denominated issue of notes on Thursday as the Assumption of Mary holiday kept trading volumes thin for most of Europe.

"With many investors out for Assumption day, activity is fairly limited this morning," a London-based analyst said. "U.S. Treasuries remaining broadly stable at 2.7% ahead of initial jobless claims later."

The Markit iTraxx SovX CEEME ex-EU index spread on Thursday was unchanged at 232 basis points over Treasuries while the Markit iTraxx Crossover index spread - seen Wednesday at 340 bps - narrowed by 2 bps.

Most spreads from Central and emerging Europe, the Middle East and Asia were marginally wider for many names in Central and emerging Europe, she said.

"We saw better retail investor demand yesterday for Vakifbank's 2022s, GarantiBank's 2017s and 2021s," she said. "Turkey's current account deficit has beaten expectations at $4.45 billion, but despite this, Turkish sovereign paper is 1 bp to 2 bps wider."

Latin American corporates saw spreads widen as much as 8 bps on Thursday amid the Treasury moves, a New York-based trader said.

"Equates to another big price move down," he said. "Some credits continue to trade weaker than others, and it's not because of liquidity. It's directly related to the credits."

Brazil-based telecommunications company Oi SA, for example, saw its paper move down more than 2 points on recent earnings results.

"Some Colombia and Chile corporates continue to trade heavy as sellers are beginning to emerge," he said. "Overall, bigger clients are now shying away from the liquids, like Petrobras and Vale."

Meanwhile, corporate bonds from Peru seemed to be spared even as volumes fell.

"Peru banks have also held up well through these aggressive U.S. Treasury moves," he said.

Friday is expected to be fairly quiet, another trader said.

"Not expecting much from the market tomorrow, apart from thinness, illiquidity and supply and demand dynamics," he said.

Korea Finance mandates leads

For its planned dollar-denominated deal, Seoul-based Korea Finance has mandated BofA Merrill Lynch, Citigroup, Deutsche Bank, Korea Development Bank and UBS for a dollar-denominated issue of notes, according to a company filing.

Proceeds from the Securities and Exchange Commission-registered deal will be used for general operations, including extending foreign currency loans.

Telefonica Moviles postpones

In other deal-related news, Santiago-based Telefonica Moviles Chile SA has postponed an issue of notes, a market source said.

The telecommunications company had mandated BBVA, BofA Merrill Lynch, Citigroup and HSBC to lead a roadshow in the United States, Europe and Latin America.

No other details were immediately available on Thursday.

Ukraine CDS up

From Ukraine, trading volumes were limited as vacation season headed into full swing, said Svitlana Rusakova of Dragon Capital.

"After the news broke that Russia is tightening customs checks and causing delays for Ukrainian exporters, the sovereign was offered down, with credit default swaps trading up at 840," she said.

Corporates were little changed, she said, with some demand noted for the State Export-Import Bank of Ukraine's (Ukreximbank) 2018s. The notes traded up at 901/2.

State Administration of Railways Transport of Ukraine (Ukrzaliznytsia) notes "got heavier, with offers slightly under 94," she said.

Russian sovereigns widen

Sovereign bonds from Russia so far this week have been declining minimally, according to a report from UFS Investment Co.

On Thursday the sovereign's 2030s widened.

"We expect continued neutral dynamics in Russian eurobonds," the report said. "Debt market behavior will be influenced by U.S. data."

Russian bank gets downgrade

Moscow-based Russian Agricultural Bank was in the news on Thursday following a downgrade of its long-term issuer default rating from BBB to BBB- from Fitch Ratings, the analyst said.

"The key driver is the limited capital support available considering the 'significant asset quality deterioration,'" she said. "Although we don't find the rating action surprising and we agree with Fitch on the deterioration of the bank's fundamentals, we find the timing of this downgrade interesting and the rating action hard to justify given its underlying assumption of reduced state support."

The bank is 100% owned by the state, she said.

"Russian Agricultural Bank's weaker asset quality is largely priced in, trading 90 bps to 100 bps wide of Sberbank," she said.

Ruwais notes see 'nibbling'

In other trading on Thursday, the recent issue of 6% notes due 2036 from Abu Dhabi-based Ruwais Power Co., a consortium led by Abu Dhabi National Energy Co. (TAQA), got a lift, a London-based trader said.

The notes priced at par to yield Treasuries plus 233.30 bps via BNP Paribas, Citigroup, HSBC, Mitsubishi UFJ, National Bank of Abu Dhabi and Standard Chartered Bank in a Regulation S deal.

The proceeds will be used to finance the Shuweihat 2 independent water and power project.

"Saw some nibbling on Ruwais," he said.

Perpetuals go lower

The perpetual notes that Abu Dhabi Islamic Bank issued at par were spotted on Thursday at 101 bid, 101½ offered, a trader said.

Dubai Islamic Bank's perpetuals, which also priced at par, traded at 97.37 bid, 98 offered. On Wednesday the notes were quoted at 105 bid, 105½ offered.

"Perpetuals are obviously lower," he said.

And Dubai-based DPWorld's 2037s were trading back near par, about 25 bps wider on the month.

Middle East in focus

Bahrain's 2023 bonds were back to par on Thursday, the London trader said.

"Another knock-on effect to the asset prices in the Middle East and North Africa, with the long-dated paper bearing the brunt of the adjustment," he said.

Some buyers were seen for Saudi Electricity Co.'s 2043s at 88.50 to 88.60.

"Real-money demand for Kipco today," he said. "Locals are happy to add Emaar Properties' 2019s near 108."

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