Issues from Evergrande, Kexim; investors watching Ukraine; Cameroon, Bulgaria deals ahead

By Christine Van Dusen

Atlanta, Feb. 10 – Investors on Tuesday were looking ahead to Wednesday’s meeting in Minsk, where European leaders were set to discuss a new peace deal in Ukraine, as Korea Export-Import Bank and China-based Evergrande Real Estate Group sold notes.

In other news from Ukraine, Britain said its decision to not supply arms will remain under review.

“While there may well be positive headlines out of Wednesday’s meeting, it will clearly not be easy to achieve a lasting peace, given how much the conflict has deteriorated in recent months,” a London-based analyst said. “Germany and France have already threatened broader sanctions if a peace deal is not agreed.”

In response, credit default swaps spreads for Russian bonds were 5 basis points wider on Tuesday morning, he said.

In trading, from Asia spent most of Tuesday’s session on firm footing before sellers emerged, moving high-grade bonds as much as 3 bps tighter, a London-based trader said.

“Flow-wise, we had some real-money buyers in India but overall it was still light, as real-money accounts remained sidelined, waiting for rates to stabilize,” he said. “In the Hong Kong and China space, financials were better bid.”

Oil corporates from China tightened, as did bonds from Korea, he said.

And the new 2022 notes from China’s Shimao Property Holdings Ltd. – 8 3/8% notes that priced at par – saw good retail investor demand and traded at 99 5/8 before closing at 99½ bid, 99 7/8 offered, he said.

Among Asian sovereigns, the long end was down one point for Philippines while the belly was down a ¼ point, he said.

“Philippines’ 2040 was last down at 106, closing at 105¾ bid, 106¼ offered,” he said. “Indonesia initially outperformed Philippines but gave up, with the long end closing down 1¼ points, the belly down ¼ points. Indonesia’s 2045 was last down at 103 5/8 and closed at 103½ bid, 104 offered.”

Middle East in focus

Middle Eastern bonds put in a busy session on Tuesday, with lots of sellers spotted for long-dated bonds from Saudi Electricity Co. and Qatar, a London-based trader said.

“Still, those bonds have had a very decent spread performance over the month and week and are nicely tighter over this period,” he said. “Feels like there’s paper around for Qatar’s 2020s and 2022s, closing up 3 bps on the bid side.”

National Bank of Abu Dhabi PJSC’s new 2¼% notes due 2020 (Aa3/AA-/AA-) that priced at 99.61 to yield mid-swaps plus 85 bps tightened on Tuesday to 70 on the bid side, he said.

“Textbook deal, tightening as rates moved lower,” he said.

Dubai Islamic Bank PJSC’s perpetuals held at 99.80 bid, par offered, he said.

“Other perpetuals are a total mixed bag,” he said. “High-yield names are the same story. All told, most spreads are performing with the rate move. Supply is limited so far this year and investment-grade names are in demand.”

Petrobras under pressure

Looking to Latin America, some trading was a bit “sloppy” on Tuesday, a New York-based trader said.

Bonds from Brazil-based Petroleo Brasileiro (Petrobras) widened alongside bonds from Vale SA, and Braskem SA continued to struggle, he said.

Brazilian banks were also under pressure as the corruption scandal engulfing Petrobras seemed to be widening to encompass more companies, he said.

In other trading from the region, high-grade bonds from Mexico remained firm and Cemex SAB de CV ticked higher amid small buying but less selling, he said.

Cencosud underperforms

The new issue of 2025 and 2045 notes from Chile’s Cencosud SA continued to move lower and wider in trading on Tuesday, a New York-based trader said.

The retail company last week sold 5.15% notes due in 2025 at 99.637 and 6 5/8% notes due in 2045 that priced at 99.909.

HSBC and Scotiabank were the bookrunners for the Rule 144A and Regulation S deal.

The notes on Tuesday were underperforming other Latin American corporates, he said, pointing to Chile’s SACI Falabella, which continued to tighten.

“The new Cencosuds are finding a home at wider spreads,” he said. “Chile, away from Cencosud, is very quiet and performing OK in here.”

Evergrande prices bonds

China-based real estate developer Evergrande sold $1 billion 12% notes due Feb. 17, 2020 at par to yield 12%, matching talk.

JPMorgan, Credit Suisse, Deutsche Bank and China Merchants Securities were the bookrunners for the Regulation S deal.

The proceeds will be used to refinance existing indebtedness.

“The new issue will allow Evergrande to free up more onshore restricted cash for land acquisitions in 2015,” a trader said. “We think there should be opportunity to pick it up on the secondary.”

Kexim sells notes

In its new deal, Korea-based Kexim sold RMB 1 billion 4.4% notes due March 3, 2013 at par to yield 4.4%, a market source said.

The notes were talked at a yield of 4.4% to 4½%.

Barclays was the bookrunner for the deal.

Bulgaria, Cameroon plan notes

Bulgaria has mandated Citigroup, HSBC, Societe Generale CIB and Unicredit as the bookrunners for a €3 billion notes program, a market source said.

The sovereign is expected to price notes in the first half of this year and then again in the fall.

And Cameroon is looking to issue up to $1.5 billion of notes with bookrunners Societe Generale CIB and Standard Chartered Bank, a market source said.

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