Gazprom, Hutchison price high-grade deals; Ecuador continues slide; quiet Thanksgiving week ahead

By Paul A. Harris

St. Louis, Nov. 17 - Emerging markets traded flat on Friday with one source spotting the JP Morgan Global Emerging Markets Bond Index (EMBI Global) unchanged at a 187 basis points spread to U.S. Treasuries late in the afternoon.

Meanwhile in the primary market, two high-grade issuers, Russia's OJSC Gazprom, and Hutchison Whampoa UK plc, a subsidiary of Hong Kong-based conglomerate, Hutchison Whampoa Ltd., priced approximately $2 billion and £700 million.

Gazprom brings $2 billion

Russian energy giant, Gazprom, issuing via Gaz Capital SA, priced approximately $1.99 billion equivalent of notes (Baa1/BBB-/BBB-) in two tranches on Friday.

The world's largest natural gas company priced a €500 million tranche of notes due March 22, 2017 at a 118 basis points spread to mid-swaps, on top of the price talk. The notes came at a dollar price of par to yield 5.136%.

The company also priced $1.35 billion of notes due Nov. 22, 2016 at a 110 basis points spread to mid-swaps, also on top of price talk. The dollar-denominated notes priced at par to yield 6.212%.

Credit Suisse and UBS ran the books.

Hutchison Whampoa upsizes

Elsewhere Hutchison Whampoa priced an upsized £700 million of unsecured notes (A3/A-/A-) in two tranches.

The conglomerate priced a £300 million tranche of 5 5/8% class A 11-year notes at a dollar price of 99.547 for a 103 basis points spread to Gilts, tight to the Gilts plus 105 basis points price talk.

The issuer also priced a £400 million tranche of 5 5/8% class B 20-year notes at a dollar price of 99.371 for a 125 basis points spread to Gilts, tight to the Gilts plus 127 basis points price talk.

ABN Amro and The Royal Bank of Scotland led the two-parter, which was upsized from £500 million.

Digesting the supply

Just before the New York lunch break, a trader told Prospect News that emerging markets seem to be having no difficulty absorbing the recent burst of corporate supply.

The trader said that Thursday's massively upsized deal from Brazilian mining firm Companhia Vale do Rio Doce (CVRD) - which came in at $3.75 billion, up from $2.5 billion - had gone well and was holding around issue price in the secondary market.

The trader added that the Brazil benchmark dollar-denominated bonds maturing in 2040, said to be the most liquid security in the emerging markets asset class, traded Friday at 132.05 bid, down 0.15 on the day.

Ecuador continues slide

Political noise ahead of second round elections in Ecuador, set for a week from Sunday, continued to take a toll on Ecuadorean debt, according to a trader.

Ecuadorian presidential candidate and former finance minister Rafael Correa, who has advocated that bondholders grant better rates on the country's sovereign debt, has been said to have drawn even with his opponent Alvaro Noboa, had enjoyed as much as a 12% lead after the first round of voting.

Opinions on how much credence to give the poll numbers, which surfaced early in the week, have varied among market sources on both the buy-side and sell-side who have spoken to Prospect News in the interim.

Some say that good news for Correa is bad news for bondholders, period.

Others say that with Ecuador entering a pre-election "quiet period" within the country, good information is exceedingly hard to come by.

Nevertheless the trader spotted Ecuador's 9 3/8% notes maturing in 2015 down a point on Friday at 104.75 bid.

The trader added that the Ecuador EMBI index, a sub-index of the JP Morgan EMBI mentioned above, had widened by 32 basis points in the space of a week.

The Ecuador EMBI was going out Friday at a 533 basis points spread to U.S. Treasuries, whereas one week before, on Friday, Nov. 10, it closed at a spread of 501.

A quiet week ahead

A sell-side official remarked that the upcoming Thanksgiving holiday in the United States is expected to quiet the global emerging markets to virtually the same extent it quiets the domestic capital markets in the States.

"Only a well-known issuer would perhaps show up with a drive-by deal," the sell-side official asserted, adding that there is a tendency not to begin roadshows before the four-day Thanksgiving hiatus and then wait to complete them after the holiday's conclusion.

However news did surface on deals expected to price during the Nov. 20 week, which will only be comprised of three sessions in the United States.

Russian Standard Finance SA, a subsidiary of CJSC Russian Standard Bank, is talking its dollar-denominated offering of 10-year fixed-rate loan participation notes (expected ratings Ba3/B-) at 9½% to 9¾%.

Citigroup and ING are leading.

JSC Kazkommertsbank has talked its benchmark sized offering of 10-year senior notes (Baa1/BB+/BB+) at 7 ¾%.

Credit Suisse and ING have the books for the deal from the Kazakhstan bank.

And Shimao Property Holdings Ltd. has talked its $500 million two-part offering (Baa3/BB+).

The Shanghai-based real estate developer talked its 10-year fixed-rate notes at 8¼% area. Meanwhile Shimao talked its five-year floating-rate notes at Libor plus 200 to 225 basis points.

Morgan Stanley and Goldman Sachs & Co. are leading the deal.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.