KWG Property, Invitel sell notes; market headlines offer mixed picture for investors

By Christine Van Dusen

Atlanta, March 23 - China's KWG Property Holding Ltd. and Hungary's Invitel Holdings AS sold notes on a Wednesday that featured good news and bad news for emerging markets assets.

First, the bad news: Euro zone concerns have popped up again, and Belarus could face a devaluation of its currency. The good news: Once-embattled Dubai World reached a restructuring agreement with its creditors.

"There has been a mixed picture today," a market source said, "with strength in Middle East assets and buying of Croatia while some of the European Union sovereigns are weak."

Said a London-based market source: "The market is a touch more defensive today as euro zone issues grab attention again."

The JPMorgan Emerging Markets Bond Index Plus spread widened by 3 basis points before closing the day 4 bps tighter at Treasuries plus 268 bps, with Argentina tighter by 34 bps and Venezuela by 19 bps.

KWG, Invitel do deals

In its new deal, China-based developer KWG Property Holding priced $350 million notes due March 30, 2016 at par to yield 12¾%, a market source said.

The notes priced in line with talk of 12¾%.

Citigroup, HSBC and Standard Chartered were the bookrunners for the Regulation S deal.

And Hungary-based telecommunications services provider Invitel priced an €80 million tap of its 9½% notes due December 2016 at 99 to yield Bunds plus 706 bps, a market source said.

Credit Suisse was the bookrunner for the Rule 144A and Regulation S notes.

Proceeds will be used to refinance existing fixed-rate notes and for general corporate purposes.

Belarus takes a beating

Belarus was in focus on Wednesday due to concerns that the sovereign's currency could be devalued. On Tuesday the country's national bank stopped sales of foreign currency to local banks in an effort to protect its reserves and talked with Russia about a $3 billion loan.

"It's all about poor old Belarus today, where the two-month-old 2018 dollar notes are now at 87.5, falling even faster than Irish government bonds," a London-based market source said during the European morning. "The Belarus curve is now 60 bps inverted as the scarcity of information on what exactly is going on there helps stoke the fear."

By afternoon, the 2018 notes were seen trading as low as 86. "That was a new issue at par a few weeks ago," a market source said.

Said the London-based market source: "A Russian bailout must be due at some point, but they are clearly waiting to extract some value first."

Slovenia's notes struggle

Also facing difficulty on Wednesday was the Republic of Slovenia's €1.5 billion 5 1/8% notes due March 30, 2026, which priced Tuesday at 99.723 to yield 5.152%, or mid-swaps plus 130 bps, a market source said.

Credit Agricole, ING, Societe Generale and Unicredit were the bookrunners for the deal.

The final book exceeded €3.6 billion, with more than 165 accounts involved. Asset managers accounted for 35%, insurers and pension funds 35%, banks 26%, central banks 3% and others 1%. The majority of the orders came from Germany, Austria, the United Kingdom and Ireland.

"That's struggling a bit," a market source said. "That's wider than reoffer now."

Dubai in demand

It was a different story on Wednesday for Dubai and its corporate names. They were all about 5 bps to 10 bps tighter on the Dubai World restructuring news.

"Dubai is trading well on the back of Dubai World closing their debt restructuring," the London-based market source said.

Said the London trader: "Dubai World's results were also better than expected, coming in with a 13% rise in full-year profit. The market for Dubai paper has been very well supported for some time now."

Buyers were snatching up Dubai paper on Wednesday.

Dubai's 2014 dollar notes, for example, closed at 102.62 bid, 102.87 offered, which is 80 bps tighter on the month. And the sovereign's 2015s and 2020s have "been catching a bid lately," he said. "However they can't compete with that sukuk 2014's performance."

Dubai World was 10 bps tighter on Wednesday while Emaar Properties was tighter by 5 bps.

Results were more mixed for Dubai Water and Electricity Authority after word that its ratings have been withdrawn by Fitch.

Active trading day

Egypt returned to radar screens on Wednesday when, just 30 minutes after the awaited reopening its stock market, trading was shut down due to a freefall in Egyptian shares.

"Bonds remain pretty well supported, however," the London trader said. "The 2020 dollar notes are catching a bid."

Abu Dhabi was slightly firmer, as was Bahrain. And Kazakhstan was "generally soft, though Kazkommertsbank still moves higher as we still can't find real offers," he said.

He also saw better sellers of Qatar National Bank and National Bank of Abu Dhabi, and the Emirate of Ras al Khaimah remains a "rock," he said. "Sukuks are still leading the way here."

Qtel International's 2025 dollar bonds are "really stuck," he said, "wider by 45 bps on the month."

Meanwhile, Turkey's corporates were very active on Wednesday, with good demand seen for names like Akbank.

The Turkey sovereign, however, opened slightly in the red as the central bank "effectively extracted 19.1 billion Turkish lira from the market by increasing the reserve ratio from 12% to 15%," the London trader said. "Sovereign spreads have widened 7 to 10 bps with a knee-jerk reaction. But we haven't seen a reaction on the corporates at all."

LatAm prices rise

In Latin America, Argentina and Venezuela saw their prices climb 50 cents from some early levels in response to the sell-off in U.S. Treasuries, a New York-based trader said.

The Argentina Boden 15s went from 96 to 96.60.

"The LatAm runners are still performing," the London trader said.

Also from Latin America, Brazil-based business conglomerate Odebrecht Finance Ltd. set out on Wednesday for a roadshow with Merrill Lynch and HSBC, a market source said.

No other details were immediately available.

Philippines oversubscribed

At the same time, some recent deals were seeing healthy demand, market sources said.

The final book for the Republic of the Philippines' $1.5 billion 5½% notes due 2026 that priced at 99.495 to yield 5.55% on Monday was more than $6.5 billion from 280 orders.

Citigroup, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan and UBS were the bookrunners for the off-the-shelf notes.

About 30% came from Europe, 30% from the United States, 22% from the Philippines and 18% from the rest of Asia. Fund and asset managers accounted for 57%, banks 27%, insurers 9%, private banks 6% and others 1%.

Asian issues get orders

Also oversubscribed were the $500 million 3¾% notes due 2016 from Industrial Bank of Korea, which priced Tuesday at 99.371 to yield 3.878%, or Treasuries plus 183 bps via Morgan Stanley, BNP Paribas, Citigroup and RBS.

The final book was $1.8 billion with 139 accounts involved, including 60% from Asia, 23% from the United States and 17% from Europe.

Funds accounted for 40%, banks 35%, insurers 11%, government agencies 7% and retail 5%.

And the final book for the $400 million 10 5/8% notes due 2018 from Singapore-based property developer Yanlord Land Group Ltd. - which came to market Tuesday at par via HSBC, JPMorgan and RBS - was about $2 billion, a market source said.

About 53% of the orders came from Asia, 32% from the United States and 15% from Europe. Fund managers accounted for 70% while private banks took up 23%, banks 5% and others 2%.

Roadshows planned

Hong Kong-based business conglomerate Citic Pacific Ltd. is planning a roadshow with HSBC and UBS, a market source said.

The marketing trip began Wednesday and is expected to conclude March 29.

Also from Asia, South Korea-based financing company Hyundai Capital Services Inc. is planning a roadshow from Monday to March 31 with Merrill Lynch, a market source said.

The marketing trip will begin in New York and travel to Boston and Philadelphia before concluding in Chicago.

Ferrexpo taps bookrunners

In other deal-related news on Wednesday, Switzerland-based Ferrexpo - which has assets in Ukraine - mandated JPMorgan, Morgan Stanley and UBS for a five-year issue of dollar notes, a market source said.

The Rule 144A and Regulation S deal will be marketed on a roadshow starting Friday.

And the Republic of Zambia plans to issue dollar-denominated notes before the end of the year, a market source said.

No other details were immediately available.

© 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.