Brazil's Petrobras sells mega-deal as forward calendar fills up; Azerbaijan's Socar ahead

By Christine Van Dusen

Atlanta, Feb. 1 - A unit of Brazil's Petroleo Brasileiro SA (Petrobras) priced a whopping $7 billion of notes, and other issuers - including Mexico's America Movil SAB de CV and Peru's Corporacion Financiera de Desarollo (Cofide) - followed suit with their own deals on a busy Wednesday for emerging markets assets.

"The spread moves on the day were 5 to 15 basis points tighter; however, there were some pockets of even better performance," a trader said. "Flow-wise it was pretty active, but overall, again, balanced."

Dubai continued to trade very well, and Abu Dhabi bonds were "a rock," a trader said.

Looking to South Africa, Eskom Properties' 2021s saw some small size trading at 105. The 2024s were trading at 101.50 in the morning, he said.

"Late in the day, there were buyers of South Africa's 2024s, which saw that bond pop a little higher," he said.

Elsewhere in Africa, GTB Finance "powered ahead," he said. "African Export-Import Bank ticks along, and meanwhile, the sovereigns remain very solid. A few bids crept in on Egypt's 2020s as credit default swaps moved lower. Morocco was affirmed at BBB- by Fitch and the bonds are still a rock."

Said a London-based trader, "It's another morning of love for credit product."

Petrobras unit sells notes

Brazil's Petrobras International Finance Co. - a unit of energy company Petrobras - priced a $7 billion issue of notes due 2015, 2017, 2021 and 2041, a market source said.

The deal included $1.25 billion 2 7/8% notes due 2015 that priced at 99.499 to yield 3.051%, or Treasuries plus 275 bps. The notes were talked at the Treasuries plus 290 bps area.

The second tranche totaled $1.75 billion 3½% notes due 2017 that priced at 99.419 to yield 3.628%, or Treasuries plus 290 bps. The notes were talked in the Treasuries plus 300 bps area.

The deal also included a $2.75 billion add-on to the company's existing 5 3/8% notes due Jan. 27, 2021, which priced at 104.181 to yield 4.796%, or Treasuries plus 295 bps. Price talk was set in the Treasuries plus 310 bps area.

And the last tranche - a $1.25 billion add-on to the company's 6¾% notes due Jan. 27, 2041 - priced at 112.208 to yield 5.938%, or Treasuries plus 295 bps. The notes were talked in the Treasuries plus 310 bps area.

BB Securities, Citigroup, Itau BBA, JPMorgan, Morgan Stanley and Santander were the bookrunners for the Securities and Exchange Commission-registered deal.

Proceeds will be used for general corporate purposes and capital expenditures.

America Movil prints bonds

Mexico-based telecommunications company America Movil priced a RMB 1 billion issue of notes due Feb. 8, 2015 at par to yield 3½%, according to a company filing.

HSBC was the bookrunner for the SEC-registered deal.

Proceeds will be used for general corporate purposes.

And Peru-based development bank Cofide priced a $400 million issue of 4¾% notes due Feb. 8, 2022 at 98.437 to yield 4.95%, or Treasuries plus 311.1 bps, a market source said.

The notes were talked at a yield in the 5 1/8% area.

Deutsche Bank and JPMorgan were the bookrunners for the Rule 144A and Regulation S notes, which include a change-of-control put at 101%.

Yapi Kredi launches notes

Turkey-based lender Yapi ve Kredi Bankasi AS launched a $500 million issue of senior notes due 2017 to yield 7%, a market source said.

The notes were previously talked at a yield of 7% to 7 1/8%.

JPMorgan, Standard Chartered Bank and UniCredit Bank are the bookrunners for the Rule 144A and Regulation S deal.

"The bank has only one outstanding bond and this new issuance is intended to support liquidity and reduce the maturity gap while diversifying the sources of funding," a London-based analyst said in a report. "Yapi has a strong profitability and a sound retail branch franchise with strong loan growth and a deposit-heavy funding structure. However, its business model is skewed toward higher-margin riskier business, affecting non-performing loan levels. A tougher operating environment, macro-economic challenges in Turkey and potential parent contagion could all weight on the credit."

Chilean bank sets price talk

Santiago, Chile-based lender Banco del Estado de Chile set price talk at the Treasuries plus 237.5 bps area for its planned $500 million issue of 10-year senior notes, a market source said.

Citigroup, Deutsche Bank and HSBC are the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used for general corporate purposes.

And Brazil-based sugar and ethanol producer Grupo Virgolino de Oliveira SA set price talk at the 12 1/8% area for its planned issue of up to $300 million 10-year notes, a market source said.

BTG Pactual, Credit Suisse and Itau BBA are the bookrunners for the Rule 144A and Regulation S notes.

Proceeds will be used for debt refinancing, capital expenditures and general corporate purposes.

Grupo Farias plans deal

In other news from Latin America, Brazil-based sugar concern Grupo Farias is planning a $300 million issue of seven-year notes, a market source said.

The notes will be non-callable for four years.

Also on Wednesday, Turkey-based financial organization Global Yatirim Holding set price talk at the 11% area for an increase of its 11% notes due June 30, 2017, a market source said.

Mitsubishi UFJ and UBS are the bookrunners for the Rule 144A and Regulation S notes.

And Kazakhstan-based Eurasian Development Bank has mandated JPMorgan and VTB Capital for a roadshow in the United Kingdom and United States, a market source said.

The roadshow will begin Feb. 6 in London and travel to Boston before concluding on Feb. 8 in New York.

Latvia, Israel Electric eyed

In other deal-related news, the Republic of Latvia is planning a roadshow for a possible issue of notes, a market source said.

The marketing trip is scheduled to begin Feb. 7 and travel to New York, Boston, San Francisco and Los Angeles before concluding on Feb. 13 in London.

Deutsche Bank, HSBC and JPMorgan are the bookrunners for the possible Regulation S transaction.

And the Israel Electric Corp. Ltd. has mandated Barclays Capital and UBS for a roadshow starting Thursday, a market source said.

The roadshow starts in London and hits New York before ending Feb. 6 in Boston.

A Rule 144A and Regulation S dollar deal may follow, subject to market conditions.

Wharf's deal oversubscribed

Hong Kong-based conglomerate Wharf Holdings Ltd.'s recent $600 million issue of 4 5/8% notes due Feb. 8, 2017 attracted $4.25 billion with 296 accounts involved, a market source said.

The notes priced at 99.515 to yield 4.725% via HSBC, JPMorgan and Standard Chartered.

About 73% of the orders came from Asia and 27% from Europe.

Fund managers accounted for 51%, private banks 20%, banks 18%, insurers 6% and others 5%.

Sberbank deal gets attention

On Tuesday, Russia-based lender Sberbank priced a two-tranche issue of $1.5 billion notes due 2017 and 2022, a market source said.

The deal included $1 billion 4.95% notes due Feb. 7, 2017 that priced at par to yield Treasuries plus 424.2 bps. The second tranche totaled $500 million 6 1/8% notes due Feb. 7, 2022 that priced at par to yield 6 1/8%, or Treasuries plus 432.8 bps.

Barclays Capital, BNP Paribas, Citigroup and Troika Dialog were the bookrunners for the Rule 144A and Regulation S deal.

"That's the main focus," the London trader said. "The five-year tranche is slowly making its way through the flippers and is now up a 1/4-point, while the sneaky 10-year offered to select clients jumps 1¼ points. The rest of the Sberbank curve has had a relief rally and other quasi-sovereign banks have moved up in line."

The VTB Bank curve was particularly active, he said.

Majid notes trade up

In other trading, the recent issue of $400 million five-year sukuk notes from MAF Sukuk Ltd. - a unit of Dubai-based developer Majid Al-Futtaim Holding - was seen trading Wednesday at 100.48 bid, 100.63 offered, a trader said.

The notes priced at par via Abu Dhabi Islamic Bank, Dubai Islamic Bank, HSBC and Standard Chartered in a Regulation S deal.

Also from the Middle East, Abu Dhabi-based developer Aldar Properties PJSC saw some selling early in the session.

"Post the news yesterday on Aldar that Mubadala is looking to offload some or all of the name from their books, the bond has actually held in better than I thought," a trader said. "We did see some initial selling down to the 109.125 bid, 109.25 offered level, versus closing at 109.87 bid, 110.37 offered the day prior."

The bond is still 75 bps wider on the month, he said.

Socar in focus

Several traders were keeping their eyes out for the upcoming five-year dollar benchmark notes from State Oil Co. of the Azerbaijan Republic (Socar). The notes are expected to come to the market this week via bookrunners Deutsche Bank, Citigroup and RBS in a Regulation S deal.

"Despite the obvious positives such as state support and sound fundamentals, there are few risks investors should keep in mind," a London-based analyst said. "The company is not very transparent, the bond is issued from the Holdco with no upstream guarantees, there are no restrictive covenants to protect bondholders in case of credit deterioration and there is a lack of clear financial strategy.

"It seems to us that the bond is intended more as a marketing tool to diversify its funding base rather than being due to a refinancing or a funding need."

She said a spread of Treasuries plus 500 bps would be a fair value for the credit risk.

"It may end up coming tighter as it will be the only index-eligible asset in Azerbaijan," she said.

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