Russia's GPB sells notes on quieter, thinner day for EM ahead of U.S. holiday; IPIC active

By Christine Van Dusen

Atlanta, Nov. 10 - Russia's GPB Eurobond Finance plc priced notes on a fairly quiet Thursday, ahead of the Veterans Day holiday in the United States and in the wake of anxiety over the European economic situation.

"It feels like we're already shifting into year-end mode in a lot of ways, in terms of reduced liquidity and in terms of volumes," a Connecticut-based trader said. "I think a lot of the dealers have been told to keep their balance sheets lean going into year-end and to avoid risk. That's definitely having an effect on liquidity and volumes."

The quieter tone is expected to continue into Friday, a London-based trader said.

"We're not expecting much in the way of action tomorrow with a U.S. holiday and, of course, it being a standard Friday," a trader said. "Choppy and thin day, really, with moderate activity."

On the buyside, the inflows into emerging markets over the last two weeks have inspired an effort to add a number of sovereign and corporate credits, the Connecticut trader said.

"That has kept a very strong bid to the market, generally, because with the dealers being so lean, they have to go right to the Street to retrieve any inventory that they sell," he said.

Much of the focus on Thursday was on the new issue market, with recent deals from the Dominican Republic and the Republic of Lithuania doing well.

"The Dominican Republic tap did pretty well, although it's a bit lower now. But that deal came with a nice sweetener, in terms of being cheap to the existing bonds," the Connecticut trader said. "Lithuania did very, very well. We saw widespread buyside, real-money accounts adding that one and we continue to see buyers, up to the moment."

From now until the beginning of December, market-watchers are expected to continue to pay the most attention to the primary market, he said.

"The focus for the next two weeks will be on the new issue side," he said. "There could be a flurry here."

IPIC stays liquid

In trading on Thursday, much of the activity once again revolved around Abu Dhabi-based International Petroleum Investment Co.'s new bonds.

"There's decent interest in the 2017s and 2022s," the London trader said.

The 2017s, which priced at 99.669, were trading Thursday at 99.50 bid, 99.70 offered. The 2022s that priced at 99.743 were seen at 99.18 bid, 99.43 offered.

"They remain the drivers in this market, as they are liquid, recent and there is balanced-enough flow," he said. "Liquidity overall remains poor, however, with depth limited for the most part."

Qatar trades heavier

Qatar traded a bit heavier on Thursday amid some whispers about possible new supply coming.

"It's nothing massive, but paper is being leaned on," he said.

In other trading from the Middle East, the recent issue of $400 million 3 7/8% notes due 2016 from Abu Dhabi's Union National Bank PJSC was seen at 98.62 bid, 99.12 on Thursday.

"It hasn't exactly flown out the door," a trader said.

The notes priced Nov. 10 at 99.05 to yield 4.087% via Citigroup, Deutsche Bank, HSBC, National Bank of Abu Dhabi and Standard Chartered Bank in a Regulation S transaction.

Odebrecht, Brazil see demand

Among recent new issues, the notes from Brazil-based engineering and chemical conglomerate Odebrecht SA saw some interest on Thursday.

The company priced on Nov. 4 a $250 million tap of its existing 7½% perpetual notes at par via HSBC in a Rule 144A and Regulation S transaction.

"That has done OK," the Connecticut trader said. "A few people are adding in smaller size on that one."

And the $100 million add-on to the Federative Republic of Brazil's 5 5/8% notes due 2041 - which came to the market on Nov. 7 at 114.7 - saw some flippers at first.

"That one was priced very generously, initially, relative to the existing bonds, and we saw some flippers," he said. "Those have been quickly absorbed over the last three or four days."

Kazakh banks in focus

Taking a look at Kazakhstan, the banking sector was in focus on Thursday with the release of asset quality statistics for September.

"The data continued to suggest deterioration in balance sheet quality," a London-based analyst said. "On a more positive note, there is some loan growth industry-wide, albeit starting from a low basis."

The month also saw substantial deterioration of the bottom line across the sector, with Halyk Bank and Kazkommertsbank bucking the trend, she said.

"We expect this month's data to be supportive for the spreads of Alliance Bank and Halyk Bank while weighing on BTA Bank and ATF Bank," she said. "The lack of an overall trend improvement in asset quality suggests that the operating environment remains subdued and visibility remains limited, with regulatory actions and government support yet to take place."

GPB prints bonds

In its new deal, Russia-based GPB Eurobond Finance priced a CHF 350 million issue of 4 3/8% loan participation notes due 2013 at par, a market source said.

UBS, Barclays Capital and Gazprombank were the bookrunners for the Rule 144A and Regulation S deal.

The notes are guaranteed by Moscow-based lender Gazprombank OJSC.

In trading, Russia's quasi-sovereign bonds began the session with a firmer tone.

"We're seeing better selling on Gazprom and Sberbank," a trader said.

New deals oversubscribed

The final book for Lithuania's aforementioned $750 million increase of its existing 6 1/8% notes due 2021 was $4.9 billion from 250 investors, a market source said.

About 62% of the orders came from the United States, 17% from Europe, 14% from the United Kingdom, 6% from Asia and 1% from others.

Asset and fund managers accounted for 72%, banks 12%, hedge funds 9% and others 7%.

And the final book for Seoul-based Korea Finance Corp.'s $750 million issue of 4 5/8% notes due 2021 was $2.4 billion from more than 170 accounts, a market source said.

About 51% of the orders came from the United States, 36% from Asia and 13% from Europe. Asset and fund managers accounted for 57%, banks and private banks 15%, insurers and others 8%, and central banks 5%.

The notes priced Nov. 8 at 99.699 with bookrunners Bank of America Merrill Lynch, Credit Suisse, HSBC, RBS and Daewoo Securities in a Securities and Exchange Commission-registered transaction.

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