Eletrobras, Kuveyt Turk print bonds on choppy, heavy day for EM; more Turkish supply eyed

By Christine Van Dusen

Atlanta, Oct. 20 - Brazil's Centrais Eletricas Brasileiras SA (Eletrobras) and Turkey's KT Sukuk Varlik Kiralama AS sold notes as emerging markets bonds took a hit on Thursday morning amid continued concern about the European debt crisis. Also steering investors away from bonds was news that first-time jobless claims for the United States were close to forecasts, which gave equities the edge.

"The market has repriced 15 to 25 basis points wider this morning," a London-based trader said, noting "a cagey start with action limited to benchmarks, with lots of Russia 2030s trading from 117¼ to 1163/4."

The Markit iTraxx SovX index spread began the day 5 bps wider.

"But the high-beta names are being hit on the open, with Russian metals up to 40 bps wider," he said.

As the session went on, bonds from emerging Europe, the Middle East and Asia continued to move wider on the news of a ban on naked credit-default swaps on sovereign debt and word that an E.U. commissioner was looking to stop rating agencies from issuing opinions on E.U. sovereigns.

"So combine this with some more brinkmanship between Germany and France and sure enough, EM is wider," a trader said.

By the afternoon, trading was choppy.

"The tone is definitely a little heavy into the close as the market attempts to digest the intraday euro-land headlines and stories," a trader said. "Confusion reigns. I'm not sure too many have a hugely strong conviction either way."

This was reflected in the thinness of the market, he said.

"I suspect this will continue into year-end," he said. "It will be thin, flaky, choppy and frustrating for most. There are some bids and offers and there will be opportunities. I'm not expecting vast amounts of activity tomorrow, but in this market at the moment, I'm not ruling out anything."

Eletrobras, Kuveyt Turk price

In its new deal, Brazil-based utility Eletrobras priced a $1.75 billion issue of notes due Oct. 27, 2022 at par to yield 5¾%, a market source said.

Credit Suisse and Santander were the bookrunners for the Rule 144A and Regulation S deal.

And Turkey-based KT Sukuk Varlik Kiralama priced a $350 million issue of notes due Oct. 31, 2016 at par to yield 5 7/8%, or mid-swaps plus 447.5 bps, a market source said.

HSBC, Liquidity Management House and Standard Chartered Bank were the bookrunners for the Regulation S notes.

The notes are guaranteed by Kuveyt Turk Katilim Bankasi AS, an Istanbul-based Islamic financial institution.

Turk Eximbank plans roadshow

Several other Turkish issuers took steps toward the market.

On that list was Ankara-based Export Credit Bank of Turkey (Turk Eximbank), which is planning a roadshow for a dollar-denominated offering of notes, a market source said.

Barclays Capital, Citigroup, Commerzbank and ING are the bookrunners for the deal.

The marketing meetings will be held from Oct. 24 to Oct. 27 in the United States and the United Kingdom.

"Hot on the heels of the new Turkey 2022s - which at 98 are now 10 bps wider from launch - comes a mandate from Turk Eximbank," the London-based trader said. "Clearly they will be hoping for better than the 10½% coupon when they last issued in 2000. Perhaps 5½% for a dollar five-year?"

Asya Katilim ahead

Also from Turkey, Istanbul-based lender Asya Katilim Bankasi AS (Bank Asya) is planning a $300 million issue of five-year notes, a market source said.

No other details were immediately available on Thursday.

"At first glance, Bank Asya is slightly bigger and more profitable than Kuveyt Turk," a trader said. "However, it doesn't benefit from the backing of a sovereign, as 52.78% of Bank Asya is publicly listed and the rest is distributed among many shareholders. Hence, we believe it should offer some premium to Kuveyt Turk."

Turkey trading subdued

In other trading from Turkey, Thursday morning was subdued for most bonds, a trader said.

"We've seen retail [investors] nibbling on Akbank's 2015s and Yasar Holdings' 2015s, but volumes are pretty low," he said.

From Russia, most quasi-sovereign bonds were firmer on Thursday morning, following earlier weakness. Gazprom and VTB Bank saw selling.

"And metals and mining are all trading very heavy today," he said.

Ukraine sees selling

Also on Thursday, bonds from Ukraine saw some selling and prices were marked lower, a trader said.

"There are plenty of offers in the broker market, which was not evident yesterday," he said, noting better buyers of Oschadbank.

Said another trader: "The Ukraine euphoria of the last few days is now tempered with offers filling in on the corporate paper."

Middle East in focus

Looking to the Middle East, Abu Dhabi-based Aldar Properties' 2014s continued their solid run as the developer announced the appointment of a new chief financial officer.

"The bonds are up at 109.375 in the Street," a trader said. "That's 90 bps tighter on the week."

Lebanon was in focus as the sovereign looked at further refinancing, a trader said.

"They have a decent spike of maturing debt in 2012," he said. "To try to knock this on the head early while the credit is at decent spreads and yields makes sense. There are only really two bonds in Lebanon below par, and one is the sinker 2017."

Abu Dhabi's International Petroleum Investment Co. remained on the road for its planned issue of notes via Barclays Capital, JPMorgan, Mitsubishi UFJ Securities, Natixis and Societe Generale.

"Their 2021s last traded at 99.62," he said.

Qatar fares well

Bonds from Qatar continued to fare well on Thursday, particularly those from Qtel International. And Aldar Properties "powered on" to close above 109 for the first time since early August, a trader said.

"There's talk of a large seller out of Aldar's 2011s and into the 2014s," he said.

Flow-wise, two-way action was seen for Dubai, Dubai Water and Electricity Authority and Emirates airline.

"We also saw some small interest in Sabic Capital and Kipco," he said. "There was also some decent demand on the front end of the Abu Dhabi National Energy Co. curve. They've had a decent week, spread-wise."

Meanwhile Africa was mostly quiet, he said. "There are some pretty solid week-on-week moves here, though," he said.

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