South Korea sells bonds as more EM issuers plan deals; selling slows for Lat-Am corporates

By Christine Van Dusen

Atlanta, Sept. 4 - South Korea priced a $1 billion issue of notes on a Wednesday that saw numerous issuers come out of their summertime shells to advance deals amid mixed spreads and limited volumes.

"U.S. 10-years sold off sharply yesterday on better data, resulting in an afternoon of sellers in the EM space, although U.S. Treasuries later retraced their move," a London-based analyst said. "Curves in the Middle East are steepening up nicely."

The Markit iTraxx SovX CEEME ex-EU index spread on Wednesday opened 6 basis points wider at 256 bps over Treasuries. The Markit iTraxx Crossover index spread - seen Tuesday at 415.5 bps - moved out to 422 bps on Wednesday.

Against this backdrop many emerging markets issuers began planning transactions, including Kazakhstan's Eurasian Development Bank, China's Swire Pacific Ltd., Mexico's TV Azteca SAB de CV, Korea's Nonghyup Bank (NH Bank) and Brazil's Grupo JBS-Friboi.

Also taking steps toward the market were Mozambique's Ematum, China ZhengTong Auto Services Holdings Ltd., Kuwait's Ahli United Bank, Brazil's Marfrig Alimentos SA and Saudi Arabia's Almarai.

"New supply for EM is in the wings, but issuers do not seem ready to bite the bullet and issue," the analyst said. "Once the realization hits home that the 10-year at 2.87% is cheap compared to the 3½% we may see next year, we expect an influx of new deals, causing market re-pricing."

In trading, it was a quiet start for bonds from the Middle East and North Africa on Wednesday, but offers picked up by lunchtime before fading as the day went on, a London-based trader said.

"Spreads are once again a mixed bag depending on the tenor, bond, Street positions and inquiry throughout the day," he said. "Steepening in Dubai Electricity and Water Authority again, with the 2015s and 2016s trading well and the 2018s and 2020s offered."

TAQA remains pressured

Selling pressure continued for Abu Dhabi Commercial Bank's (TAQA) 2023s, which were quoted Wednesday in the mid-91s, a trader said.

"TAQA's 2021s and 2023s are lower again, moving about 11 bps to 15 bps wider on the month," he said. "Good interest in Dubai's 2021s between 104¾ and 105. Unchanged on the week."

Middle East in focus

Bonds from Bahrain moved a bit lower on Monday, the London trader said.

"The Qtel International curve feels well-offered, as does Dolphin Energy's 2021s and Emirates' 2023s and 2025s," he said. "Volumes are certainly not off the charts, but there definitely was more interest out there today."

The primary market was quiet for names from the Gulf region.

"No real signs of supply in what is normally an active period in the region," he said.

Argentina moves up

Looking to Latin America, most of the higher-rated sovereign credits ended Wednesday nearly unchanged while higher-yielding credits were mixed, a New York-based trader said.

Bonds from Argentina moved up as much as 1¼ points while Venezuela's notes declined as much as 2½ points.

And sellers outpaced buyers, the trader said.

Selling eases for corporates

On Latin America's corporate side, bonds were mostly unchanged and activity was limited to a few names, another New York-based trader said.

"The onslaught of client selling seen yesterday has also eased up a great deal," he said. "But strong outflow numbers and weak Treasuries should keep the market weak and participants in sell mode."

Two-way activity

Trading of most bonds from Central and emerging Europe, the Middle East and Asia on Wednesday still seemed slow, the analyst said.

"Two-way flow, although the market feels generally a little wider," she said. "We are seeing some interest in Sberbank 2023s this morning while in Turkey there was selling from fast money yesterday. But retail buying continues."

Bids for Ukraine

From Ukraine, bids remained for the sovereign, particularly its 2023 notes, said Svitlana Rusakova of Dragon Capital.

The notes were spotted at 85 5/8 before getting a lift to 85 7/8.

"The bond is now one of the most expensive on the curve and seems a bit squeezed," she said.

Meanwhile, the corporate space was quiet, with some offers for Donbass Fuel & Energy's (DTEK) 2018s.

South Korea sells notes

In its new deal, South Korea priced a $1 billion issue of 3 7/8% notes due 2023 at 98.791 to yield 4.02%, or Treasuries plus 115 bps, a market source said.

The notes priced at the tight end of talk, set at Treasuries plus 115 bps to 120 bps.

Citigroup, Deutsche Bank, Goldman Sachs, HSBC, Korea Development Bank and Woori Investment and Securities are the bookrunners for the Securities and Exchange Commission-registered transaction.

The proceeds will become part of the sovereign's Foreign Exchange Stabilization Fund, which is used for selling and purchasing foreign securities, depositing or lending, guaranteeing debt, and temporarily paying foreign currency debt incurred by Korean institutions, according to a filing with the SEC.

EDB plans deal

Kazakhstan-based Eurasian Development Bank is planning to issue dollar-denominated notes as part of a tender offer for its outstanding $500 million 7 3/8% notes due 2014, according to a company announcement.

BNP Paribas, JPMorgan, HSBC and Deutsche Bank are the dealer-managers for the transaction.

The new notes are part of the company's $3.5 billion medium-term note program.

Swire, TV Azteca roadshows

In other deal-related news, China-based conglomerate Swire Pacific will set out on Sept. 9 for a roadshow to market a possible issue of notes, a market source said.

HSBC and JPMorgan are arranging the marketing trip.

And Mexico's TV Azteca mandated BCP Securities, Espirito Santo Investment Bank, Jefferies and UBS for a roadshow to market a dollar-denominated issue of notes.

The Regulation S roadshow will begin on Friday and take place in the Americas, Europe and Asia.

NH Bank, Friboi on deck

Korea's NH Bank will embark on a roadshow on Sept. 9 for a possible deal via Barclays, Citigroup, ING and Standard Chartered Bank, a market source said.

An issue of notes may follow.

And Brazil-based meat processor Friboi is looking to issue $400 million notes due in 2021 with bookrunner JPMorgan in a Rule 144A and Regulation S deal through JBS USA and JBS USA Finance Inc.

The proceeds will be used for general corporate purposes and to fund the tender of the company's 11 5/8% dollar notes due in 2014.

Ematum mandates banks

Mozambique government agency Ematum has mandated BNP Paribas and Credit Suisse as bookrunners for a dollar-denominated issue of benchmark-sized notes due in seven years, a market source said.

The proceeds from the Regulation S-only deal will be used for the development of Mozambique's domestic fishing infrastructure.

ZhengTong on road

Auto dealership group China ZhengTong set out on Wednesday for a roadshow to market its planned issue of dollar-denominated notes with JPMorgan and Credit Suisse in Hong Kong, Singapore and London.

Proceeds from the Regulation S offering will be used to repay a portion of the company's bridge loans.

And Kuwait's Ahli United Bank is looking to issue dollar-denominated notes, a market source said.

Marfrig markets bonds

Brazil-based food processor Marfrig Alimentos is on a roadshow for an issue of dollar-denominated notes that will be used to fund the tender offer of the company's 9 5/8% 2016 notes, a market source said.

BTG Pactual, Bradesco BBI and Credit Suisse are the bookrunners for the new Rule 144A and Regulation S deal.

The roadshow began Wednesday in London and will travel to Los Angeles, Santiago, and Boston before concluding on Sept. 12 in New York.

Almarai sukuk ahead

Saudi Arabia's Almarai is planning a roadshow for a hybrid issue of Islamic bonds, a market source said.

The integrated dairy foods company previously mandated Banque Saudi Fransi, BNP Paribas, HSBC and Standard Chartered Bank as bookrunners for a dollar-denominated offering of Islamic bonds.

Eustream does deal

Earlier this week, Slovakia-based gas transmission company eustream priced a €250 million add-on to its existing 3¾% notes due 2020 at 100.894 to yield mid-swaps plus 180 bps.

Citigroup, ING, JPMorgan, KBC and Erste Group were the bookrunners for the Rule 144A and Regulation S deal.

The original issue €500 million notes priced in July at a spread of 235 bps over mid-swaps.

New issue from Chilean bank

Banco Santander Chile sold CHF 150 million 1¾% notes due 2019 (Aa3//A+) at 99.915 to yield mid-swaps plus 75 bps, a market source said.

UBS was the bookrunner for the deal.

Banco Santander Chile is a bank based in Santiago, Chile.

Gapzrom considers bonds

One trader was keeping an eye on Russia's OAO Gazprom, which is said to be considering a eurobond that would be used to increase capital expenditures.

The Moscow-based gas company held a conference call on Tuesday to discuss its first-quarter results, which showed strong growth, she said.

Any new bond issue would depend on whether or not the company decides to increase its investment program, she said.

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