Bank of China sells notes; Greece situation worries investors; eyes on Pacific Rubiales

By Christine Van Dusen

Atlanta, June 24 – Bank of China Ltd. sold notes on a Wednesday that started out relatively stable for most emerging markets, then turned sharply on the news that Greece had not reached a deal with its creditors, bringing the debt-saddled sovereign that much closer to bankruptcy.

“Feels a bit broken, at the moment,” a trader said.

Finance ministers from the euro zone reportedly walked out of a meeting with sovereign officials. Greece is required to pay the International Monetary Fund €1.6 billion this month or face default.

“The market shut down immediately,” a London-based trader said. “But I would say investment-grade cash [from Asia] closed 2 basis points to 4 bps wider on the headline.”

Investors were also eyeing Latin America-focused Pacific Rubiales, this time after Institutional Shareholder Services (ISS) recommended that its clients vote against the takeover bid from Mexico-based Alfa SAB de CV and Harbour Energy Ltd.

“The reference share prices immediately prior to announcement were heavily affected by a commodity price swoon, which has since begun to reverse,” ISS said, according to a press release. “Management’s own projections of present value during a March 2015 earnings call were significantly higher than the proposed take-out price, and the process, particularly the lack of an auction or other proactive market check, may not have been sufficiently robust to ensure the best outcome for shareholders.”

ISS also reportedly calls into question the ability of executives to buy into the newly-private company at the same price the acquirer is paying per share.

“The ISS news seems to have spooked the market, as the 2019s, 2023s and 2025s traded down in the Street, with one dealer buying and multiple selling,” a trader said. “ISS is an organization that does have some influence and could be an important voice for Pacific Rubiales’ disparate retail shareholder base.”

Baidu sees some action

The recent issue of notes from China’s Baidu Inc. got some attention in trading on Wednesday, a trader said.

The $750 million 3% notes due June 30, 2020 that priced at 99.866 to yield 3.029%, or Treasuries plus 135 bps, “held firm at reoffer,” he said.

The same was true for the $500 million 4 1/8% notes due June 30, 2025 that priced at 99.830 to yield 4.146%, or 175 bps over Treasuries, following talk in the 180-bps area.

Goldman Sachs and JPMorgan Securities were the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general corporate purposes.

Lat-Am in focus

From Latin America, low-beta spreads widened on the day as most risk assets performed poorly in the wake of the latest news from Greece, a New York-based trader said.

Credit default swaps spreads for Brazil closed at 256 bps from 249 bps and Mexico’s finished at 129 bps from 126 bps.

Bonds from Venezuela were mostly unchanged to a touch higher, he said, amid good two-way flow but “not a whole lot of conviction in either direction.”

Haitong draws orders

The new issue of notes from China’s Haitong Securities Co. Ltd. – RMB 1 billion 5.15% notes due 2018 that priced at par, matching talk – drew a final order book of RMB 3.1 billion from 91 accounts, a market source said.

Haitong International, BOC International and BESI were the bookrunners for the Regulation S deal.

About 98% of the orders came from Asia and 2% from Europe, the Middle East and Asia, with 74% going to fund managers, 16% to private banks and 10% to banks.

On Wednesday, the new notes were seen at 100.10 bid, 100.30 offered, a trader said.

The proceeds from the new deal will be used for working capital and general corporate purposes.

Bank of China sells bonds

Bank of China priced two tranches, launched another and set talk for three more in a Regulation S deal, a market source said.

The S$500 million 2¾% notes due June 30, 2019 priced at par to yield 2¾%.

The €500 million floating-rate notes priced at par to yield Euribor plus 100 bps.

The RMB 2 billion two-year notes launched at 3.6%.

The dollar benchmark notes due in three years were talked at a spread in the Treasuries plus 140-bps area.

The dollar benchmark notes due in five years were talked at a spread in the 150-bps area.

The dollar benchmark notes due in 10 years were talked at a spread in the 180-bps area.

Bank of China, Barclays, Citigroup, DBS Bank and HSBC are the joint global coordinators, joint lead managers and joint bookrunners for all of the transactions.

CBA, Goldman Sachs Asia and JPMorgan are other bookrunners for the dollar notes.

OCBC and Standard Chartered Bank are other bookrunners for the Singapore dollar notes.

Kexim prints notes

On Tuesday, Korea Export-Import Bank (Kexim) priced a two-tranche issue of notes due in 2020 and 2026 in a SEC-registered deal, a market source said.

The $600 million 2 5/8% notes due Dec. 20, 2020 priced at 99.863 to yield Treasuries plus 98 bps after talk in the 100-bps area.

The notes were trading at reoffer on Wednesday.

The $400 million tap of the company’s 3¼% notes due in August of 2026 priced at 99.195 to yield Treasuries plus 95 bps after talk of a spread of 95 bps to 100 bps. The deal’s original size was $500 million.

On Wednesday, the notes traded at reoffer.

Credit Agricole, Credit Suisse, Goldman Sachs, HSBC, JPMorgan, Mizuho Securities and Morgan Stanley were the bookrunners for the deal. KDB Daewoo Securities was a joint lead manager, according to a company filing.

The proceeds will be used for general operations, including extending foreign currency loans, and for the repayment of maturing debt.

© 2015 Prospect News.
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