African Development, China Fishery unit, IFC print bonds; Latin America volatility wanes

By Christine Van Dusen

Atlanta, July 24 - Tunisia's African Development Bank and a unit of China Fishery Group Ltd. sold notes on a Tuesday that also saw the pricing of a Brazilian real-denominated issue of bonds from International Finance Corp. (IFC) as emerging markets investors showed some caution - but not paralyzing concern - about the ongoing European economic crisis.

"The news that Moody's reduced the rating outlook on Germany, Luxembourg and the Netherlands is the main topic this morning," according to a report from Erste Group Research. "Evidently, Moody's believes that the ongoing debt crisis in the euro zone is no closer to resolution than when it last reviewed these countries' ratings. In fact, it appears as if the risks of an accentuation of the crisis have risen."

Fixed-income assets from Central and Eastern Europe have reacted belatedly, if much at all, to these and other economic events, the report said.

Indeed, there is "a distinct lack of panic in markets despite broad-based weakness of risky assets this week," according to a report from Barclays Capital. "Weakness has been isolated to the euro and euro area assets."

Some weakness in risky assets is likely to persist until European Union leaders announce concrete steps toward containing the contagion, Barclays said.

Also impacting the picture on Tuesday was negative economic data from the United States, which showed that manufacturing shipments and orders have dropped and overall growth has slowed significantly.

Spreads widened by about 5 basis points to 10 bps across most of emerging markets.

"I think the market is going to remain whipsawed by the risk-on, risk-off [environment] that we get every couple of days," said Enrique Alvarez, head of Latin America fixed-income research at IdeaGlobal. "That's going to intensify off the fact that we have a lot more pressure on Spain yields and a lot more unknowns about what will occur ahead."

Argentina, Venezuela stand out

In general, investors have been purchasing and putting away emerging markets bonds, particularly those from high-rated Latin American issuers, Alvarez said.

"There are price markdowns that occur every so often when you see really intense risk moves, but for the most part the volatility has decreased significantly," he said. "Most of the paper is held for yield benefits."

Argentina and Venezuela are particularly vulnerable to the shifts in risk sentiment, he said.

"That's become more defensive in the last few days, with Argentina always subject to more selling than Venezuela due to the fact that they have a lot more negative dynamics, domestically," he said. "These two are standing out as the volatile credits that gain most of the volume."

Most other names were quiet on Tuesday, he said.

"Other credits are very much at a standstill," he said. "They're so highly sought after. There was, at some point, a very large yield benefit to accumulating these credits. Cash prices are just so high now."

China Fishery sells notes

In its new deal, China Fishery's CFG Investment SAC sold $300 million 9¾% notes due July 30, 2019 at par to yield 9¾%, a market source said.

The notes priced in line with guidance, which was set at the 9¾% area.

HSBC, Bank of America Merrill Lynch, Standard Chartered, ANZ, Jefferies, Rabobank and Deutsche Bank were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used to fund the expansion of the group's fishing operations in the North Pacific Ocean, to repay debt and to finance working capital.

China Fishery Group is a Hong Kong-based manager and operator of fishing vessels for coastal and deep sea industrial fishing.

African Development prices

In another new deal, Tunisian lender African Development Bank priced a A$100 million tap of its 5¼% notes due March 23, 2022 at 110.595 to yield 3.92% via Deutsche Bank and RBC Bank.

The issue size now totals A$850 million.

And IFC, the development financing arm of the World Bank, priced a R$150 million issue of 5% notes due Dec. 21, 2015 at 100.7605 with bookrunner JPMorgan.

No other pricing details were immediately available on Tuesday.

The day also had market sources whispering about a possible issue of sterling-denominated notes from Russia's Sberbank.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.