New issues from First Gen, Swire; spreads tighten amid U.S. shutdown; Turkey deal ahead

By Christine Van Dusen

Atlanta, Oct. 2 - Philippines' First Gen Corp. and China's Swire Pacific Ltd. printed new notes on a Wednesday that saw fairly busy trading and a tightening of most emerging markets spreads, even as the U.S. government remained shut down.

"Yesterday's House and Senate meetings didn't inspire much confidence, and President Obama's speech suggested the rift will be ongoing," a London-based analyst said. "The U.S. Treasury has begun implementing final measures to pay the nation's bills ahead of the Oct. 17 deadline."

Meanwhile, the Markit iTraxx SovX CEEME ex-EU index spread on Wednesday opened at Treasuries plus 245 basis points, following Tuesday's level of 247 bps. The Markit iTraxx Crossover index spread - seen Tuesday at 405 bps - tightened to 399 bps on Wednesday.

Bonds from Central and emerging Europe, as well as the Middle East and Asia, started Wednesday's session mostly flat or slightly better.

"Another fairly busy day with the below-consensus ADP data seeing the U.S. Treasury rally to 2.60%," a London-based trader said. "As such, Middle East and North Africa assets performed well, with spreads - at worst - matching the move in underlying Treasuries. At best they were moving 5 bps to 10 bps tighter."

Bahrain bonds were popular in the secondary market, with solid retail investor demand spotted for the sovereign's 2020s, 2022s and 2023s, a trader said.

"I suspect sellers, for the near-term, are done," he said.

Against this backdrop, several issuers advanced deals, including Turkey, Qatar's Al Khalij Commercial Bank, Slovakia's Zapadoslovenska energetika AS (ZSE) and Industrial and Commercial Bank of China Ltd.

First Gen prints bonds

Philippines-based power generation company First Gen priced a $250 million issue of 6½% notes due 2023 at par to yield 6½%, or Treasuries plus 389.5 bps, a market source said.

The notes were talked at a yield in the 6 5/8% area.

Deutsche Bank, HSBC and JPMorgan were the bookrunners for the Regulation S deal.

Swire sells notes

Hong Kong-based conglomerate Swire Pacific priced $700 million 4½% notes due 2023 at 99.403 to yield Treasuries plus 195 bps, a syndicate source said.

The notes came in at the tight end of talk, set at Treasuries plus 195 bps to 200 bps.

HSBC and JPMorgan were the bookrunners for the Regulation S deal.

As of Wednesday morning the books were $3.5 billion.

Al Hilal moves up

The recent issue of notes from Abu Dhabi-based Al Hilal Bank - $500 million of 3.267% notes due 2018 that priced at par - opened Wednesday at 101.05 bid, 101.15 offered, a trader said.

The notes came to the market at a spread of mid-swaps plus 170 bps via HSBC, Standard Chartered Bank, Citigroup and National Bank of Abu Dhabi in a Regulation S offering.

Later in the European session, the notes moved to 101.11 bid, 101.23 offered.

"Still a superb effort from this debut issuer," a trader said.

Al Hilal oversubscribed

The final book for Al Hilal Bank's new deal was $6.3 billion from more than 220 accounts, with 37% from the United Arab Emirates, 22% from Asia, 21% from Gulf countries, 17% from Europe and 3% from the offshore United States.

Banks picked up 48%, fund managers 31%, sovereigns 13%, insurers 4% and private banks 4%.

Sabic trades down

Another new issue was fairly active in trading on Wednesday. Saudi Arabia-based Saudi Basic Industries Corp.'s (Sabic) $1 billion 2 5/8% five-year notes traded at 99¼ bid, 99 3/8 offered after pricing at 99.559, a trader said.

The notes came to the market at Treasuries plus 130 bps on Thursday with Citigroup, HSBC Securities, Mizuho Securities and RBS Securities Inc. in a Regulation S deal.

Sabic is a Riyadh-based manufacturer of chemicals, fertilizers, plastics and metals.

Perpetuals tick lower

Perpetual notes from the Middle East were active in trading on Wednesday, a trader said.

Dubai Islamic Bank's notes traded between 95½ and 95 7/8 after pricing at par.

Abu Dhabi Islamic Bank's perpetual bonds, which priced at par, traded at 99½ bid, 100½ offered.

Emaar, Turkey outperform

Emaar Properties' 2019s continued to shine, improving by 60 bps on the month.

Bonds from Bahrain Telecommunications Co. widened on Wednesday, a trader said, while some buyers emerged for bonds from Kuwait.

"But as usual, it's fairly illiquid," he said.

And bonds from Turkey and its corporates outperformed on Wednesday, he said.

"Seen some interest in a bevy of names," he said. "They are posting some decent moves on the month."

Risk aversion in Lat-Am

Looking to Latin America, bonds traded slightly better but with light volumes on Wednesday morning, a New York-based trader said.

Spreads tightened slightly for names like Brazil's Vale SA. And paper from Odebrecht SA and its affiliates traded higher.

"Even seeing better bids in laggards," he said.

By the market's close, flows were balanced and bonds from Venezuela and PDVSA had dropped as much as 3 points, he said.

"Seems risk aversion is in play," he said.

Ukraine sovereigns rally

Many bonds from Ukraine have rallied so far this week, said Svitlana Rusakova of Dragon Capital.

Boosting spirits were Naftogaz's coupon payment and a loan extension by Gapzrombank, she said.

"Buying became aggressive," she said, referring to sovereign bonds. "We also saw some demand in corporates, yet they generally lagged the sovereign."

Turkey gives guidance

Turkey set initial talk at the mid-swaps plus 325-bps area for a planned dollar-denominated issue of Islamic bonds due in five years (expected ratings: Baa3//BBB-), a market source said.

HSBC, QInvest and Standard Chartered Bank are the bookrunners for the Rule 144A and Regulation S deal, which is expected to price on Thursday.

As of Wednesday morning the order book was more than $4 billion.

Credito Real postpones deal

Mexico-based financial services company Credito Real SAB de CV has postponed its planned issue of $300 million notes due in five years, a market source said.

Initial price guidance was set in the high-7% area.

BofA Merrill Lynch and Barclays were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds were to be used for general corporate purposes, including the acquisition of loan portfolios and short-term debt refinancing.

Roadshow for Qatari bank

Qatar's Al Khalij Commercial Bank will market a dollar-denominated issue of benchmark-sized notes during a roadshow starting Thursday, a market source said.

BNP Paribas, HSBC, QNB Capital and Standard Chartered Bank are the bookrunners for the Regulation S deal.

The roadshow will take place in Asia, the Middle East and Europe.

The lender is based in Doha.

ZSE sets size

Slovakia's ZSE set the size at €250 million for an issue of five-year notes and €300 million for an issue of 10-year notes, a market source said.

The company could also issue an €80 million tranche of longer-dated notes.

Citigroup and Societe Generale are the bookrunners for the Regulation S-only deal.

A roadshow is underway and will end on Friday.

The issuer is a Bratislava, Slovakia-based electricity utility company.

ICBC taps 11 bookrunners

Industrial and Commercial Bank of China Ltd. (ICBC) has mandated ICBC, ANZ, BofA Merrill Lynch, Citigroup, Credit Agricole, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, RBS and UBS as bookrunners for a dollar-denominated issue of notes due in 10 years, a market source said.

The Regulation S deal is expected to be benchmark-sized.

The bank is based in Beijing.

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