Emirates Airline prints notes; more sellers than buyers of EM assets; spreads mixed

By Christine Van Dusen

Atlanta, Jan. 31 - Dubai's Emirates Airline printed notes on Thursday as sellers continued to outnumber buyers of emerging markets assets.

"Another interesting day, with a couple of accounts using the dip in the market to add," a London-based trader said. "But for the most part, [there] were sellers."

The Markit iTraxx SovX index spread started the session 2 basis points tighter while the corporate index widened by 3 bps.

"Bid/offers are widening, and again, some of the covers are wide and wonderful," the London trader said. "At least some value is back in the market."

Said a London-based analyst, "In EM we are still seeing better selling mainly from Asian investors, following selling from European investors yesterday."

Against this backdrop, Mexico's Grupo de Cementos de Chihuahua SAB de CV set price talk for an upcoming issue of notes.

Meanwhile, market sources were keeping an eye on the upcoming issue of dollar notes from Russia-based fertilizer and phosphates company OJSC PhosAgro.

The company will set out on Friday for a roadshow with Citigroup, Raiffeisen Bank, Sberbank and VTB Capital. A Rule 144A and Regulation S deal is expected to follow.

The company's financials are generally sound, and cash flow generation is high while costs are low.

"However, PhosAgro operates in a volatile and cyclical industry," the analyst said. "Ratings downgrade pressure could arise from large acquisitions or investments or large debt-financed dividends or share buybacks."

In its new deal, Dubai's Emirates priced a $750 million issue of 4½% amortizing notes due on Feb. 6, 2025 at 99.941 to yield mid-swaps plus 300 bps, a market source said.

The notes were talked at a spread in the high-200 bps to 300 bps area.

Citigroup, Standard Chartered, Deutsche Bank, JPMorgan, Emirates NBD and Morgan Stanley were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used for general corporate purposes.

Ferrexpo deal ahead

The planned issue of about $500 million notes due in five years from Ukraine-based iron ore company Ferrexpo plc was also on radar screens on Thursday.

The company's roadshow for a Rule 144A and Regulation S offering began Thursday.

Morgan Stanley and Credit Suisse are the bookrunners.

"The new deal comes after two years of no issuance opportunities for Ukrainian credits, so the company is looking to extend the maturity of its 2016 bond," the analyst said.

Proceeds will be used for general corporate purposes.

Ukraine under pressure

In trading from Ukraine, sovereign bonds have been under some selling pressure, said Svitlana Rusakova of Dragon Capital.

"Still there was good support," she said.

The 2020s weakened to 105 bid, 106 offered while the 2021s moved down to 106¾ bid, 107¾ offered.

"This was actually a massive outperformance compared to other EMs," she said.

Dubai notes get attention

The recent two-tranche issue of $1.25 billion notes due in 10 and 30 years from Dubai was somewhat active in trading on Thursday.

The Regulation S deal included $750 million 3 7/8% 10-year Islamic bonds that priced at par to yield 3 7/8%. The bookrunners were Dubai Islamic Bank, HSBC, National Bank of Abu Dhabi and Standard Chartered Bank.

Those notes were trading Thursday at 98.31 bid, 98.62 offered.

Dubai's second tranche - $500 million 5¼% conventional notes due 2043 - priced at 98.148 to yield 5 3/8%.

The notes traded Thursday at 97.37 bid, 98.37 offered.

Emirates NDB Bank, HSBC, National Bank of Abu Dhabi and Standard Chartered Bank managed the transaction.

Meanwhile, Dubai Electricity and Water Authority's 2022s were seen at 122.625, about 22 bps wider on the week. Year-to-date, the high print is 125.75.

And Abu Dhabi National Energy Co. (TAQA) saw buyers, with the 2021s and 2023s closing tighter on the week.

ADIB notes trade up

In other trading from the Middle East, the recent 6 3/8% perpetual notes from Abu Dhabi Islamic Bank that priced at par were quoted at 103¾ bid, 104½ offered.

Abu Dhabi Islamic Bank, HSBC, Morgan Stanley, National Bank of Abu Dhabi and Standard Chartered Bank were the bookrunners for the Regulation S-only sukuk.

The final book was $15.5 billion, the source said.

"ADIB perpetuals look like an OK value," a trader said. "We've pulled back a good four points, closing at 103.75 versus the 107.75 high print a few weeks back."

Qatar paper moves lower

From Qatar, long-dated bonds moved lower, the London trader said.

The 2042s were quoted at 124.375, 5 bps wider on the month.

"But again, it feels a lot worse given this reached 130 in the opening week of the year," he said.

Kuwait's Kipco was an outperformer while some two-way nibbling was reported for Qatar National Bank's 2018s at 98.

"That's the lowest-priced asset in the Qatar space, along with the recent Qtel," a trader said. "Asia still seems to like the Qtel bonds, however they certainly don't like much else, as we're only really seeing sellers."

Africa in focus

From Africa, Senegal's bonds moved down as much as 1½ points early in trading on Thursday, a trader said.

"Egypt gets no love, pushing much wider," he said. "Gabon, Ghana and Zambia are all marked lower."

Morocco's 2022 notes traded between 102.25 and 102.75 during the European afternoon.

"South Africa is now the best part of 30 bps wider on the month," he said.

Mexican issuer gives guidance

Mexico's Grupo de Cementos de Chihuahua set price talk at the 8½% area for a planned $260 million issue of seven-year notes, a market source said.

A roadshow for the Rule 144A and Regulations S deal ended Thursday.

BBVA, Citigroup and Scotiabank arranged the meetings.

The Chihuahua, Mexico-based company is involved in the production, distribution, marketing and sale of cement and mortar, ready-mix concrete and other construction materials.

This news followed the Wednesday pricing by China-based real estate company Guangzhou R&F Properties Co. Ltd. of a $200 million tap of its 8¾% notes due 2020 at 100.50, a market source said.

The notes priced in line with talk, set at the 100.50 area.

Citigroup, Deutsche Bank, Goldman Sachs, HSBC, Morgan Stanley and UBS were the bookrunners for the Regulation S deal.

The original $400 million issue priced earlier this month at par to yield 8¾%, or Treasuries plus 753 bps.

The proceeds are expected to total $198 million and will be used to refinance existing indebtedness, for land acquisition and for general corporate purposes.

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