Israel, Hyva Global sell notes as investors slowly return; Russian issuers advance deals

By Christine Van Dusen

Atlanta, March 17 - Risk appetite improved on Thursday as emerging markets investors and issuers began to recover from the shock of the nuclear accident in Japan and adjusted to the idea of continuing turmoil in the Middle East. Still, volumes and issuance remained low, with just Israel and Hyva Global BV selling notes.

“It’s been a bit more of a risk-on environment today,” a Toronto-based market source said. “I don’t see any clear catalyst. People are just adjusting their expectations. And volumes remain low. People are just adjusting small positions.”

The JPMorgan Emerging Markets Bond Index Plus spread narrowed by 7 basis points, with Argentina tighter by 20 bps, Ukraine by 9 bps, Venezuela by 10 bps and Colombia by 8 bps.

“Market sentiment remains very fragile,” according to an RBC Capital Markets report.

Said a London-based market source: “Until we get some clarity on the situation at Fukushima and the Middle East, the markets will remain in some kind of nervous paralysis.”

Croatia up a touch

As an indicator of the day’s sentiment, a market source pointed to the recent $1.5 billion 6 3/8% notes due 2021 from the Republic of Croatia, which priced Wednesday at 98.25 to yield 6.617%.

The notes – via Barclays Capital, Deutsche Bank and JPMorgan in a Rule 144A and Regulation S notes deal – were seen trading up about a point in the gray market.

“But it actually reopened today at reoffer plus ¼,” he said. “It seems to be quite well placed, given its relative calm in the secondary.”

Also showing some promise on Thursday were Russian names, particularly Gazprom.

And market watchers were gossiping about Russian lender Sberbank, which is said to be interested in buying Turkish bank Sekerbank TAS.

Russian Railways plans notes

Also from Russia, the sovereign is planning to issue dollar-denominated notes due 2041 before the end of the year.

And OAO Russian Railways whispered its upcoming issue of sterling-denominated notes due 2031 at the Gilts plus 300 bps area, a market source said.

Barclays Capital, Goldman Sachs and VTB Capital are the bookrunners for the notes.

“You’ve got to admire Russian Railways for coming with a 20-year sterling deal so soon after International Petroleum Investment Co.’s 15-year sterling deal,” he said. “IPIC is 30 bps wider, which shows how thin the sterling market is. At talk of Gilts plus 300 to 325 bps area, it’s bang in line with the much better-rated IPIC deal.”

IPIC sees buyers

IPIC’s sterling notes saw some buyers late Thursday, a London-based trader said.

“The spreads are still struggling versus the launch,” he said. “However I expect some performance over time as the bonds get taken down.”

In other trading among Middle Eastern names, Dubai continued to trade well, though the 2020s remain a laggard at about 100 bps north of Ukraine.

“And the Dubai 2014 dollar sukuk was another 10 bps tighter today,” he said.

He said it was worth looking at Qatar Islamic Bank’s sukuk notes, “which has become pretty much the tightest MENA bank, z-spread-wise.”

The trader also saw street sellers in Abu Dhabi paper and more buyers on Egypt. “We also saw retail buyers on IPIC’s euro notes and two-way on Emaar Properties’ 2016s,” he said. “Qatar and Abu Dhabi should be the two biggest beneficiaries (of the Japan crisis) as one would expect a retreat from nuclear power, or at least a slowdown, and an increase in demand for natural gas and oil.”

Bahrain in focus

Better buying was also seen for Bahrain, where spreads tightened by 10 to 12 bps, as strife continued in the country.

“The entry of Saudi troops into Bahrain, as part of a first contingent of security assistance provided by fellow members of the Gulf Cooperation Council, underlines the gravity of the political situation in Bahrain and a worrying geopolitical dimension to the region’s recent flare-up of unrest,” according to a report from Moody’s Investors Service.

“We believe that there is a substantial risk that the medium-term fundamentals of Bahrain will be impaired by the present crisis,” the report said. “Our monitoring of political developments across the Middle East region could result in further rating actions if we are convinced that the deteriorating political situation is likely to endure.”

Israel, Hyva print notes

In its new deal, Israel priced $124 million 1.57% notes due March 15, 2012 at 99.9 to yield 1.67%, according to an announcement from the sovereign.

Barclays Capital was the bookrunner for the Regulation S notes.

And Netherlands-based hydraulic cylinder maker Hyva Global BV priced $375 million senior secured notes due March 24, 2016 at par to yield 8 5/8%, a market source said.

The notes priced in line with guidance, whispered at the high 8% to 9% area.

Bank of America Merrill Lynch, Goldman Sachs, Nomura and Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used to fund the acquisition of Hyva by Unitas Capital and NWS Holdings from 3i Group plc.

TPV does deal

These deals followed the Wednesday pricing of Hong Kong-based investment holding company TPV Technology Ltd.’s RMB 500 million notes due March 21, 2014, which came to market at par to yield 4¼%, a market source said.

The notes, via ICBC Asia, priced in line with talk of a yield in the 4¼% area.

Also from Asia, South Korea-based lender Shinhan Bank is planning a dollar-denominated issue of notes, a market source said.

The notes are expected to come to market by the end of March.

And Singapore-based property developer Yanlord Land Group Ltd. set the tenor for its planned issue of between $300 million and $500 million notes at seven years, a market source said.

HSBC, JPMorgan and RBS Securities are the bookrunners for the Rule 144A and Regulation S notes.

Indonesia, Sharjah ahead

In other deal-related news on Thursday, Indonesia concluded its roadshow for a planned issue of $2 billion of notes due 2021, a market source said.

Deutsche Bank, JPMorgan and UBS are the bookrunners for the deal.

The marketing trip began on Monday in Zurich and traveled to London and Boston before wrapping up on Thursday in New York.

And Dubai-based lender Sharjah Islamic Bank is planning a $500 million issue of sukuk notes, a market source said.

HSBC and Standard Chartered are the bookrunners for the deal, which is expected to come to market during the second quarter.

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