GarantiBank, Hyundai Steel, Banco Cruzeiro sell bonds on weak day; Mubadala notes active

By Christine Van Dusen

Atlanta, April 14 - Turkey's Turkiye Garanti Bankasi AS, South Korea's Hyundai Steel Co. and Brazil's Banco Cruzeiro do Sul SA priced notes on a Thursday that saw continuing weakness for emerging markets assets, with most of the trading action focused on the recent notes from Abu Dhabi-based Mubadala Development Co. PJSC.

The weakness was fueled by renewed concerns about the Japan nuclear situation as well as fresh fears about the euro zone crisis. Greece's bonds took a beating on news that the sovereign may need to seek debt restructuring after a joint audit by the International Monetary Fund and the European Union takes place in June.

"Sentiment soured during the European morning after a moderately positive session in Asia," according to a report from RBC Capital Markets.

The JPMorgan Emerging Markets Bond Index Plus spread was wider by 2 basis points on Thursday afternoon before closing 2 bps tighter, at Treasuries plus 258 bps.

"The market struggled, spread-wise, today," a market source said. "The richness on the front end of this week and the back end of last week has somewhat evaporated."

Said an emerging markets strategist: "It's more of a fragile market this week, which pretty much should be expected since we had such a nice run-up before that."

GarantiBank prices

In its new deal, Turkey-based lender GarantiBank priced a two-tranche issue of $800 million notes due 2021 and 2016 in a Rule 144A and Regulation S transaction, a market source said.

The deal included $500 million 6¼% notes due 2021 that came to market at 98.086 to yield 6 3/8%. The second tranche totaled $300 million floating-rate notes due 2016 that priced at par to yield Libor plus 250 bps.

Deutsche Bank, Goldman Sachs, JPMorgan and Standard Chartered Bank were the bookrunners for the deal.

In another new issue, South Korea-based steel producer Hyundai Steel sold $500 million 4 5/8% notes due April 21, 2016 at 99.788 to yield 4.673%, or Treasuries plus 249 bps, a market source said.

Merrill Lynch, Citigroup, Credit Suisse, HSBC and JPMorgan were the bookrunners for the Rule 144A and Regulation S transaction.

Proceeds will be used for refinancing.

Banco Cruzeiro does deal

And Brazil-based lender Banco Cruzeiro priced $150 million 7 5/8% notes due April 21, 2014 at 99.342 to yield 7 7/8%, a market source said.

Deutsche Bank and UBS were the bookrunners for the Regulation S deal, which was talked at a yield in the area of 7 7/8% to 8%.

"A lot of these deals already had roadshows, so the books have been filled and they're just being placed," the strategist said. "Whether we'll see a slowdown in issuance in the coming days because of uncertainties in external markets, I can't really say."

Hypermarcas, Poland ahead

In other deal-related news, Brazil-based health and personal care products manufacturer Hypermarcas SA set the size at $750 million and the yield at 6¾% for its planned issue of 10-year notes, a market source said.

Bradesco BBI, Citigroup, HSBC, Itau and JPMorgan are the bookrunners for the Rule 144A and Regulation S notes, which are non-callable for five years.

Proceeds will be used to repay debt, for working capital and for general corporate purposes.

And the Republic of Poland has mandated Citigroup, Goldman Sachs and RBS for a 10-year issue of benchmark-sized notes, a market source said.

Proceeds will be used for general governmental purposes and to finance the state's budget borrowing requirements.

Neuquen sets guidance

Also on Thursday, Argentina's Neuquen Province set price talk for its planned issue of $260 million 10-year bonds at the 8¼% area, a market source said.

Proceeds are expected to be used for the repayment of debt or for infrastructure projects.

Also from Latin America, Peru saw a sell-off in equities and related weakness in bonds amid concerns that a left-wing candidate could win the presidential election.

The sovereign's 2025 bond was down ¾ of a point, or wider by 7 bps, the emerging markets strategist said. And the 2019 bond was down ½ point, or wider by 7 bps as well.

Active morning for Mubadala

In trading, the new two-tranche issue of notes from Abu Dhabi-based investment vehicle Mubadala Development saw a lot of movement and investor interest on Thursday.

The $1.5 billion issue came to market Wednesday, with $750 million of 3¾% five-year notes pricing at 98.975 to yield Treasuries plus 180 bps and $750 million 5½% 10-year notes at 99.484 to yield Treasuries plus 210 bps.

Barclays Capital, HSBC, National Bank of Abu Dhabi, Societe Generale and Standard Chartered were the bookrunners for the Rule 144A and Regulation S transaction.

The 2016 notes opened at 99.40 bid, 99.70 offered and traded as high as 99.75. The 2021 notes were seen at 100.10 bid, 100.50 offered in the morning, then traded at 100.20 bid, 100.35 offered.

"That's been exceedingly active," a London-based trader said. "We were very active, trading over $50 million of these bonds in the first three hours alone."

Bonds calm by afternoon

By the end of the European session, the bonds calmed down, he said.

"We are slightly off the high prints on both new deals," he said. "We've seen very good activity on the 2016s and one solid buyer in the street on the 2021s near 100.30."

The two deals were solid, tightening in the secondary market with good liquidity, he said.

"I must admit we were hit with a wall of paper this morning but expect the loose bonds to over time find a home," he said.

"They limited each tranche to $750 million and the credit is very well regarded, so again they can probably still perform a smidge."

Middle East in focus

In other trading from the Middle East, Abu Dhabi-based property developer Aldar Properties PJSC was "on the move," a trader said, noting that the corporate's 2014 bonds were seen at 110 bid, 110.50 offered on Thursday.

"Emaar Properties is 5½ points off the lows," he said.

Other Dubai names, including Dubai Water and Electricity Authority, were heavy on Thursday.

"DPWorld paper remains well supported, with the 2017s tighter by 25 bps on the week," he said. "Longer-dated DPWorld 2037s have underperformed the 2017s over the last week and month but are still ticking along nicely, going out at 94.37 bid, 94.87 offered."

And the trader was a better buyer of Kuwait-based lender BBK.

"Kuwaiti names had a few buyers," he said. "We have seen some buyers of [Kuwait Projects Co. Holding] Kipco's 2016s and 2020s," he said.

Bahrain mixed

Also on Thursday, Bahrain had mixed performance in the market, with some sellers for the sovereign's 2014s and 2020s.

And Qatar was largely quiet, with Qtel International "struggling to muster any sort of move," the London-based trader said. "They traded down to 90, or wider by 15 bps on the week."

Looking to Africa, some bids appeared for Ghana and Gabon, which both finished the session a couple of bps tighter.

"Nigeria wrapped around 103, or z-spread plus 300 bps, and some support was seen on Morocco's 2017s," he said.

Meanwhile, Turkey was roughly unchanged from Wednesday. A trader said he was a better buyer of Yasar Holding AS and better seller of Yuksel Insaat AS.

© 2015 Prospect News.
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