Primary market picks up with Qatar Islamic Bank, others doing deals; corporate issues eyed

By Christine Van Dusen

Atlanta, Sept. 30 - Emerging market investors engaged in some profit taking on Thursday, selling off some sovereign names to make way for the recent list of new issues, which grew with the pricing of notes from Qatar Islamic Bank, Hongkong Land, Brazil's BR Properties, Peru's BBVA Banco Continental, Peru's Interbank, South Africa's Gold Fields and Indonesia's Bumi Resources.

Still, some sovereigns did get attention during the day, including Venezuela, Gabon, Ghana and South Africa, sources said.

In general, "we're seeing a relatively quiet conclusion to September," a Connecticut-based trader said. "Volumes are very light. But in the last couple of days we've seen some people taking some profits and selling some of the stuff that's had a nice run to make room for deals in the pipeline."

Investors sell sovereigns

Early in the New York session, net moves were "small" in the EMEA region "as market attention focused on the euro zone" amid news of the bank bailout program in Ireland and the downgrade of Spain by Moody's Investors Service, according to an RBC Capital Markets report.

By late in the day, "investors opted to sell" and "appetite for risk never recovered," the report said. "Most EM assets ended the day near flat, lacking any real direction."

Prices, the trader said, "are a bit expensive on some of the sovereign names. Guys are starting to move out of the sovereign names like Mexico and Peru and into some of the new corporate deals and new issues."

The JPMorgan Emerging Markets Bond Index Plus finished Thursday at a spread of 275 basis points over Treasuries, 3 bps tighter, with Venezuela up 24 bps and "the only real mover coming under profit-taking pressures," RBC said.

That sovereign was one of the few to see new money "because of the yield pickup," the trader said.

Africa in focus

Gabon, Ghana and South Africa were also "outperformers," he said.

The reason Africa is drawing attention is because "there's still a little bit of yield pickup versus some of the Latin American countries of similar rating, and accounts are still attracted to the diversifying aspect of it," he said. "It's become one of the buzz areas of EM."

Capitalizing on this buzz on Thursday was South Africa-based gold mining subsidiary Gold Fields Orogen Holding Ltd., which priced $1 billion 4 7/8% notes due 2020 at 99.297 to yield 4.965%, or Treasuries plus 245 bps, a market source said.

Barclays, JPMorgan and Citigroup were the bookrunners for the Rule 144A transaction, which includes a make-whole call at 40 bps.

By late afternoon, the notes were trading at 244 bps bid, 240 bps offer, a source said.

The notes are guaranteed by Gold Fields, GFI Mining South Africa Ltd., Gold Fields Operations Ltd. and Gold Fields Holding Co. (BVI) Ltd.

Proceeds will be used to repay existing debt and for general corporate purposes, according to a Moody's Investors Service report.

"The name of the game has been the diversifying aspect of African names," the trader said. "The pricing is fine, so it will probably be OK."

Qatar corporates price

Several other new deals priced on Thursday.

Qatar Islamic Bank sold $750 million 3.856% fixed-rate sukuk notes due Oct. 7, 2015 at par to yield mid-swaps plus 237.5 bps, a market source said.

HSBC, Credit Suisse and QInvest were the bookrunners for the Regulation S-only deal.

The notes were about eight times oversubscribed, with the book totaling about $5.9 billion, a market source said.

Also from Qatar, telecommunications company subsidiary Qtel International Finance Ltd. has mandated Barclays Capital, Deutsche Bank, Mitsubishi UFJ Securities, Qatar National Bank, Standard Chartered Bank and RBS as bookrunners for a dollar-denominated benchmark-sized issue of notes, according to a company announcement.

A roadshow for the Rule 144A and Regulation S offering will begin Monday and travel through the United States, Europe, the Middle East and Asia.

Property developers do deals

Also pricing on Thursday was property developer Hongkong Land Co.'s $600 million 4½% notes due 2015 that came to market at 98.765 to yield 4.615%, according to a company announcement.

HSBC, Standard Chartered and UBS were the bookrunners for the offering.

Proceeds will be used for general corporate funding requirements, including refinancing of existing debt.

The notes are the first issued under the company's $3 billion guaranteed medium-term note program, which has allowed Hongkong Land "to move swiftly in raising debt to take advantage of favorable market conditions," said chief financial officer John R. Witt in a written statement.

"We are very pleased with the excellent response to the issue from regional and international institutional investors," he wrote.

The day also saw Brazil-based developer BR Properties price $200 million perpetual notes at par to yield 9% via Credit Suisse and Itau in a Rule 144A and Regulation S transaction.

And Peru's Banco Internacional del Peru SAA (Interbank) priced $400 million 5¾% notes due Oct. 7, 2020 at 99.82 to yield 5.774%, or Treasuries plus 325 bps, a market source said.

Bank of America Merrill Lynch and JPMorgan were the bookrunners for the Rule 144A and Regulation S transaction.

BBVA, Bumi print notes

In another new deal, Peruvian lender BBVA Banco Continental priced $200 million tier one step-up notes due 2040 at par to yield 7 3/8% via Credit Suisse and BBVA Securities in a Rule 144A transaction.

Thursday also saw Indonesia-based coal exploration and exploitation company PT Bumi Resources Tbk. print $700 million notes due 2017 at par to yield 10¾% with Credit Suisse, Deutsche Bank and JPMorgan.

These new deals from BR Properties, BBVA Banco Continental and Bumi have done "very well," the Connecticut-based trader said. "The new BBVA notes are up 2 points."

Meanwhile, the recent notes from Sri Lanka - $1 billion bonds due 2020 that priced at par to yield 6¼% - have "done pretty well for a relatively expensive" issue that has seen "decent support, but not too far to the upside," he said.

There remain quite a few deals in the pipeline waiting to price, a London-based trader said.

"There's a lot of stuff hanging around that's taking a while to get done," he said. "There's only so much that can get done at any given time."

Recent deals have "priced so tight," he said. "There's been too much coming in, during a two- or three-week period. They're taking longer also because they're just on a normal timeline. In previous weeks when the market was so hot, deals could get done more quickly than usual. This is more normal."

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