Turkey widens post-coup attempt; Busan Bank prices $250 million notes; EM credit tightens

By Paul A. Harris

Portland, Ore., July 18 – Emerging markets credit tightened on the New York day, with Brazil five-year credit default swaps closing at 290 basis points bid, in from 295 bps bid, and Mexico five-year CDS closing at 142 bps bid, from 144 bps bid, according to a market source.

The index was up a nickel from last week, at 93.20 bid, from 93.15 bid.

Spreads opened weaker with oil prices drooping below $45 per barrel but tightened as oil, emerging markets currencies and stocks improved on the day.

Latin American high yield finished mixed, with Argentina unchanged but Venezuela higher at the front end of the yield curve.

Venezuela’s state-owned PDVSA’s notes due in 2017 were 75 bid, up from 73½ bid.

Venezuela sovereign bonds due 2027 were also higher at 49½ bid, up from 49¼ bid.

There were two-way markets, but volumes were largely subdued, the source said.

In the primary market Busan Bank (Baa2/BBB+/BBB+) priced $250 million of 3 5/8% 10-year senior tier II notes at a 210 bps spread to Treasuries.

Turkey wider on the morning

Turkey dominated headlines early Monday, as investors sift through headlines related to last Friday night’s attempted coup.

Turkey foreign exchange and credit default swaps were pushing wider on Monday, with five-year CDS trading at a 253 bps bid, a trader said.

With the coup having failed and the Central Bank of the Republic of Turkey coming in to support the market, the currency retraced most of its backward move, a market source said.

Among corporates, the new Yapi ve Kredi Bankasi AS (Yapi Kredi) 4½% notes due July 19, 2023, which investors were chasing prior to the coup, were among the corporate issues under pressure, as investors that were feeling that prior to the volatility valuation were already stretched.

Among corporates that were mentioned, Koc Holding AS’ 3½% notes due 2020 were 99.62 bid, 100.62 offered, while the 5¼% notes due 2023 were 102¾ bid, 103¾ offered.

The Arcelik AS euro-denominated 3 7/8% notes due 2021were 102.38 bid, 103.28 offered. The dollar-denominated 5% notes due 2023 were 98.60 bid, 99.60 offered.

There was relentless selling in Turkish bank paper, exacerbated by rich pre-coup prices, a trader said, adding that there seemed to be little interest in buying the dip.

Turkish banks were around 40 bps wider on the European morning, the source said.

Meanwhile emerging markets technicals remain firm, with accounts seeing cash inflows. However, in the past two to three weeks, accounts were covering underweights, a market source said, adding that the latest headlines probably provide an incentive to stay underweight in the asset class.

Busan Bank 10-year deal

Busan Bank has priced $250 million of 3 5/8% 10-year senior tier II notes at a 210 bps spread to Treasuries, according to a market source.

The issue, which played to over $2.3 billion of orders, came at an issue price of 99.585 to yield 3.675%.

Joint bookrunner Standard Chartered Bank will bill and deliver. Credit Agricole CIB and HSBC were also joint bookrunners.

The Busan, South Korea-based bank was formerly known as Pusan Bank.

Africa Finance sells CHF bond

Africa Finance Corp. (AFC) announced in a Monday press release that it has issued its debut senior unsecured Swiss franc-denominated bond, raising CHF 100 million 0.85% bonds due Dec. 27, 2019.

UBS Investment Bank and Deutsche Bank AG London Branch were the joint lead managers.

The bond was issued following a non-deal roadshow in Geneva and Zurich held in June 2016. The bond issuance enables AFC to further diversify its funding sources and will provide additional long-term liquidity to support the AFC’s investment activities, the release stated.

The proceeds of this bond issue will be used to fund vital infrastructure projects across the African continent, according to the release.

China Minmetals roadshow

Investor meetings began on Monday for a contemplated Regulation S dollar-denominated offering of notes from China Minmetals Corp. (expected ratings Baa1/BBB+), according to a market source.

Investor meetings are scheduled to take place in Hong Kong and Singapore.

Deutsche Bank, DBS Bank Ltd. HSBC, Bank of China, ICBC, Barclays, BofA Merrill Lynch, ING, MUFG and UBS are managing the sale.

The metals and minerals trading company is based in Beijing.

Sberbank postpones

Moscow-based Sberbank postponed meetings with fixed-income investors in Europe, Asia and the Middle East, according to a market source.

The bank may re-launch the dollar-denominated Regulation S tier II Basel III compliant deal at a later time, the source said.

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