Greece concerns recede, EM assets rally; Emirates readies deal; Middle Eastern names trade up

By Christine Van Dusen

Atlanta, May 31 - Emerging markets assets rallied a bit and spreads tightened on Tuesday as Greece seemed to be getting a handle on its debt problems, but issuance was scarce and volumes were thin, post-holiday.

"Hopes that the E.U. will be able to sort out Greece's debt problems before the end of June and without a major restructuring - a view given some credence by comments from E.U. official Jean-Claude Juncker - spurred a risk-on rally in EM," according to a report from RBC Capital Markets. "The improved market sentiment allowed external bond spreads to contract."

The JPMorgan Emerging Markets Bond Index Plus opened 4 bps tighter before closing down 5 bps at Treasuries plus 285 bps, with Venezuela tighter by 27 bps and Colombia by 12 bps.

In trading, the recent new issue of notes from HSBC Bank Middle East ticked up on Tuesday while Dubai, Qatar and Abu Dhabi saw tightening.

And while the pace of the primary market slowed on Tuesday, several issuers advanced deals, including Emirates Airline, Banco Santander Chile SA, the Republic of Latvia, Estonia's Elering AS and Hungary's OJSC OTP Bank.

"May is traditionally a tricky month, and we had a few hurdles and hiccups along the way, but generally we're closing out the month pretty well supported," a London-based trader said. "The tone today was constructive with lower-than-average volumes."

Emirates gives guidance

Dubai-based Emirates Airlines set price talk at mid-swaps plus 337.5 bps for its planned dollar-denominated issue of benchmark-sized notes due 2016, a market source said.

Deutsche Bank, Emirates NBD, HSBC and Morgan Stanley are the joint bookrunners for the Regulation S deal, which is expected to price on Wednesday.

"The market is readying for Emirates Airline's return to the capital markets," a trader said. "I think it should be OK without running away. It's a solid brand name with good profitability and coming in line with Dubai corporates. Keep an eye on issue size. Too many loose bonds will not be helpful."

This news followed the Friday pricing of Brazil-based power generator Centrais Eletricas do Para SA (Celpa)'s $250 million 10½% notes due June 3, 2016. The notes came to the market at par to yield 10½%, wider than talk in the 10 1/8% area.

Bradesco BBI, HSBC, Itau and Standard Bank were the bookrunners for the Rule 144A and Regulation S notes, which are non-callable for three years and include a change-of-control put at 101% with a ratings decline. Proceeds will be used for the repayment of short-term debt.

Issuers select bookrunners

Also on Tuesday, Banco Santander Chile - a Santiago, Chile-based subsidiary of financial services company Grupo Santander - mandated Bank of America Merrill Lynch, JPMorgan and Santander for a roadshow starting June 6, a market source said.

The marketing trip will begin in Los Angeles and travel to Chicago on June 7, Boston on June 8, New York on June 9 and the New York area on June 10.

And Latvia mandated Citigroup and Credit Suisse for a Rule 144A and Regulation S offering of notes, a market source said.

A roadshow will begin on June 2 and travel through Europe and the United States.

The sovereign previously announced plans for a $500 million issue of notes by the end of June.

Elering, OTP mandate leads

Also tapping bookrunners on Tuesday was Elering, the Estonian government-owned operator of the national electricity transmission grid. The company has mandated Deutsche Bank and Nordea Markets for a Regulation S-only issue of notes, a market source said.

A roadshow will begin June 6 in Helsinki and Copenhagen and travel to London, Frankfurt, Munich, Geneva and Zurich before wrapping up on June 10 in Paris.

And Hungary-based lender OTP Bank has mandated BNP Paribas and Deutsche Bank for a roadshow that starts June 2 and will travel through Europe, a market source said.

TAM oversubscribed

In other news, the final book for Brazil-based TAM Capital 3 Inc.'s $500 million of 8 3/8% notes due June 3, 2021 was $2 billion, a market source said.

The notes priced on May 26 at 99.169 to yield 8½%, or Treasuries plus 541.5 bps, after being talked at 8½% to 8¾%.

About 47% of the orders came from the United States, 32% from Europe and 21% from Latin America. Asset managers accounted for 61%, private banks 19%, hedge funds 10%, insurance and pension managers 7% and banks 3%.

BTG Pactual, Santander and BB Securities were the bookrunners for the Rule 144A and Regulation S notes, which are non-callable for five years and include a change-of-control put at 101% with a ratings downgrade.

Proceeds will be used for debt refinancing, pre-delivery payments and general corporate purposes.

The notes are guaranteed by TAM Linhas Aereas SA and TAM SA, a Sao Paulo-based airline.

HSBC sees demand

In trading on Tuesday, the recent $500 million issue of 3.575% notes due 2016 from HSBC Bank Middle East - which came to the market on May 26 at par to yield mid-swaps plus 155 bps - was seen at 100.80 bid, 101 offered.

Later in the session the notes were trading at 101 bid, 101.125 offered.

"That bond has a good feel and is ticking along nicely," a London-based trader said. "That's seen early local demand."

Also from the Middle East, the recent issue of notes from the United Arab Emirates' SIB Sukuk Co. II Ltd. - $400 million 4.715% notes due 2016 that priced at a spread of 270 bps over mid-swaps - opened Tuesday at 101.65 bid, 101.95 offered.

"That's quiet and unchanged," he said.

Dubai opened tighter by 5 bps while Qatar started the day tighter by 1 to 2 bps. Names from Abu Dhabi opened tighter by 2 to 4 bps.

And the recent bonds due 2019 from Lebanon, an issue of $650 million 6% notes that priced at par, were seen Tuesday at 100.05 bid, 100.20 offered.

Belarus, BTA Bank lag

Belarus started the day off weaker but bounced back from the lows, a trader said. The sovereign's 2018 bonds were seen at 85.50 bid, 86.50 offered after pricing Jan. 19 at par to yield 8.95%.

"The Belarus 2018s dropped 4 points before bouncing a point," he said.

A notable underperformer for the day was Kazakhstan's BTA Bank, which was down ½ point.

Meanwhile, names from Africa all opened very firm, including recent laggard Egypt, which saw its bonds better bid on Tuesday.

"South Africa is strong after some good GDP data," a trader said, while pointing out that a South African micro-lender called African Bank could be mulling issuance.

Senegal was well supported, as were the recent notes from Nigeria's GTB Finance BV, which came to the market on May 12 at 98.981 and were trading Tuesday at 102.75 bid, 103.50 offered.

"Ivory Coast is reportedly going to miss the June 30 payment," he added.

Russia tightens

In other trading, Russia did not see any negative impact from its recent rate hike, with most debt tighter by 5 to 10 bps, a trader said.

"Even the new OJSC Russian Agricultural Bank 2021 dollar subordinate notes are now 15 bps tighter from launch," he said.

The notes priced at par to yield 6% on May 26 via Barclays Capital, JPMorgan and VTB Capital in a Rule 144A and Regulation S transaction.

"Russia's bailout seems a long time ago now," the trader said.

And Turkey's sovereigns saw good performance on Tuesday, he said.

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