Morning Commentary: Political upheaval in Brazil eyed; TSKB fades but still ‘stellar’

By Christine Van Dusen

Atlanta, May 13 – Investors were watching Brazil and Turkey on Friday as both dealt with political turmoil and Turkey coped with more terror attacks.

“In Brazil, the Senate yesterday decided to move forward with the motion to impeach president [Dilma] Rousseff,” a London-based strategist said. “Rousseff now has to stand down for up to 180 days and stand trial while vice president [Michel] Temer assumes her role temporarily.”

And in Turkey, new terrorist actions “serve as a tragic reminder of Turkey’s involvement in the fight against several militant and terror groups,” he said.

Against this backdrop, Turkey-based Turkiye Sinai Kalkinma Bankasi’s (TSKB) new deal, a $300 million issue of 4 7/8% green bonds due 2021 that priced at 99.244 to yield mid-swaps plus 387.5 basis points, was fairly active in trading on Friday morning.

After strong performance on Thursday – hitting a high of 100.26 as investors embraced the green bond – TSKB’s notes faded, a trader said.

The notes were seen Friday at 99.55 bid, 99.85 offered.

It was “still a stellar trade for the issuer,” he said.

The bond’s spread is unlikely to narrow from here, the strategist said.

“We consider room for further tightening from these levels as fairly limited, not to mention that the issuance comes ahead of further political uncertainty,” he said.

Looking to the Middle East, trading volumes and investor interest picked up during the week, with recent notes from Abu Dhabi seeing ongoing demand, a London-based trader said.

Perpetuals from the region were a “mixed bag” on Friday, he said.

Boubyan climbs

The new issue of notes from Kuwait’s Boubyan Bank KSCP – $250 million 6¾% perpetual notes that priced this week at par – has moved up 2¾ points since issuance, the trader said.

Boubyan Capital, HSBC and Standard Chartered Bank were joint global coordinators for the Regulation S sukuk. Boubyan Capital, Dubai Islamic Bank, Emirates NBD Capital, HSBC, KFH Capital, National Bank of Kuwait and Standard Chartered Bank were joint lead managers and bookrunners.

“Many have underestimated this market, and some issuers have printed very useful-sized deals so far this year,” he said.

Qatar, Bahrain get attention

Long-end paper from Qatar seemed to be in “wait-and-see” mode amid rumors of upcoming supply, the trader said.

“Still good performance from Bahrain, especially the 2020s and 2021s,” he said, pointing out that the notes have tightened about 30 bps during the month.

Ezdan settles down

Qatar-based real estate developer Ezdan Holding Group's new $500 million 4 3/8% notes due 2021 that priced this week at 99.446 to yield 4½%, or mid-swaps plus 333 bps, “seems to have settled down after a wild debut,” he said.

“A slew of weaker hands got out early doors and pushed her down to a low of 96.75,” he said. “It's since recovered, and we’ve traded two-way today in the 97.70 to 98.20 range. I suspect over time this one will be OK, given the bonds feel to me that they are being slowly picked up, regionally.”

HSBC and Mashreq were the joint global coordinators for the Regulation S sukuk. Barwa Bank, Emirates NBD Capital, HSBC and Mashreq were the lead managers and bookrunners.

© 2015 Prospect News.
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