China Resources Land, GTB print notes on jittery, weaker day for EM; Gildemeister ahead

By Christine Van Dusen

Atlanta, May 12 - With concerns about Greece not entirely soothed by the sovereign's successful Treasury bill auction earlier in the week, emerging markets investors sold off risky assets on Thursday while most issuers waited out the volatility.

Only China Resources Land Ltd. and Nigeria's GTB Finance BV priced notes while Chile's Automotores Gildemeister SA and Qatar Islamic Bank took steps toward doing new deals.

"There are some jittery markets out there," a trader said. "It was not a panic or 'get-me-out' type of day, but we are definitely 5 to 10 basis points wider across the board."

The risk aversion wasn't helped by falling commodity prices and weaker U.S. equities, sources said. Also contributing to the less positive picture was the guilty verdict for hedge fund manager Raj Rajaratnam of Galleon Management, who had been charged with fraud and conspiracy for insider trading.

"Risk assets are all feeling weak," a market source said.

So investors engaged in widespread selling. "It's a proper sell-off across all EM assets, pretty much, on the back of global growth concerns," a trader said.

GTB sells bonds

In its new deal, Nigeria's GTB Finance sold $500 million 7½% senior notes due May 19, 2016 at 98.981 to yield 7¾%, or Treasuries plus 588 basis points, a market source said.

The notes priced at the higher end of talk, which was set at 7½% to 7¾%, via bookrunners Morgan Stanley and JPMorgan in a Rule 144A and Regulation S deal.

The notes are guaranteed by Guaranty Trust Bank plc, a lender based in Lagos, Nigeria.

"We like the bank, but given the market mood it may struggle initially," a market source said.

The company's existing 2012 dollar bonds were seen trading Thursday between 103 and 103.50, the trader said.

"I've heard the new GTB might be only a $300 million issue size, which should be supportive and a nice contrast to what is normally the trend of upsizing and pricing deals at the tight end of guidance," he said. "With a few recent bank deals from Kazakhstan and Turkey not doing too well, it will be interesting to see how this bond goes over time and at that yield. However, it does look appealing."

China Resources does deal

Also on Thursday, Hong Kong-based property developer China Resources Land sold $750 million 4 5/8% senior notes due May 19, 2016 at 99.353 to yield 4.772%, or Treasuries plus 290 bps, a market source said.

The notes priced in line with talk, which was set at the Treasuries plus 295 bps area.

HSBC, BOC International and DBS Bank were the bookrunners for the Rule 144A and Regulation S notes.

Up ahead is a 10-year offering of notes from Chile-based vehicle distributor Automotores Gildemeister via bookrunner JPMorgan, a market source said.

The Rule 144A and Regulation S notes are non-callable for five years and will include a change-of-control put at 101%.

Proceeds will be used to repay debt and for general corporate purposes.

QIB plans notes

The day also saw Qatar Islamic Bank planning a sukuk issue of notes - with a tenor of more than five years - sometime in 2011, a market source said.

Also from the Middle East, good selling was seen for Abu Dhabi's International Petroleum Investment Co. and Abu Dhabi-based investment vehicle Mubadala Development Co. PJSC.

"It feels like dealers were still running some longs," he said.

And some market-watchers were awaiting the planned five-year sukuk notes worth about $300 million from the United Arab Emirates' Sharjah Islamic Bank (SIB) via Standard Chartered Bank and HSBC.

"It will be interesting to see price talk on the Sharjah Islamic Bank as this could be an interesting little deal," the trader said.

Abu Dhabi names supported

In other trading from the region, Abu Dhabi saw solid selling on Thursday. "We alluded to the fact that valuations were stretched and there's been some useful widening today," the trader said.

"It's interesting that Abu Dhabi National Energy Co. is holding in well," he said. "Week-on-week moves show the move out of the front end into the belly of the curve. The long end remains well supported."

Good support was also shown for Abu Dhabi Commercial Bank. And ongoing retail demand was seen for Bahrain's BBK.

Overall, flows were mixed and the tone was defensive, a trader said.

"I'm waiting for better entry points; [I] have lobbed out a lot of paper and am keeping things close to home," he said. "Let's see what tomorrow brings, but I'm not expecting much in the way of volumes."

Russia outperforms

Thursday also saw Russia outperform, with recent comments about no further issuance in 2011 managing to buoy the quasi-sovereign sector, a London-based market source said.

Better buying was seen for Russia-based Alfa Bank's 2021s, which were seen at 101.875 bid, 102.25 offered on Thursday after pricing at par on April 19.

Turkey underwhelmed early in the session, at 5 to 10 bps wider.

"That makes sense when you consider what's happening to (the Turkish currency) and local rates, which are up 40 bps," he said. "But the sovereign curve has started to find some support at the longer end."

He also noted that there remains loose paper out for Finansbank AS. "It's trading at around Libor plus 465 bps, which is 110 bps over its reoffer level."

The market also saw Ukraine down 1 point. "There's not loads of selling, but prices are all marked more defensively," a trader said.

Kazakh issuers struggle

Some names from Kazakhstan were also struggling on Thursday, including lender BTA Bank. The lender published financial results that came in weak.

"A first look at the (BTA Bank) results statements don't have the big surprises the market was fearing, but it's not exciting enough to stop the rot on prices," the London-based market source said. "They're making new lows at 99.5 as the price action scares everyone away."

One market source is recommending that investors switch from BTA Bank's 2018s to Alliance Bank's 2017s.

"BTA currently trades at a premium to Alliance Bank, and we believe the bonds appear attractive at these levels," she said. "Although pricing of both is subject to sentiment shifts as to the value of state ownership, the decline of BTA's price looks overdone."

Also from Kazakhstan, lender JSC Kazkommertsbank's (KKB) new 2018 dollar notes on Thursday were down 4 points from issuance.

"We've seen the first buying of KKB," a trader said.

Jordan, Senegal get attention

In other trading, most names from Africa were marked lower with no significant selling pressure, a trader said.

"Jordan's 3 7/8% 2015 dollar notes are still active," he said, pointing out that they were trading Thursday at 93.875 bid, 94.25 offered.

Senegal also got some attention on Thursday.

"The Senegal 2021 dollar notes priced last week at 9¼%, and they just printed at 8.1%," a trader said. "That's 200 bps north of Nigeria's 2021 dollar notes."

That level felt a little heavy, a market source said.

Argentina in focus

In other news, RBC Capital Markets is now recommending a bearish stance on Argentina's debt, according to a new report.

"The country's public debt to GDP ratio - 41.8% - would not be troubling for a country that followed more prudent policies and as a result had more stable and reliable access to capital markets," the report said. "However, unlike the debt of other LatAm sovereigns, the dedicated investor base for Argentine debt is limited, making it highly vulnerable to swings in global risk appetite."

Argentina's investor base is limited because the sovereign's unorthodox economic policies have inspired mistrust from the markets, RBC said.

"Among the major LatAm countries, Argentina's debt is the highest beta to the S&P 500 index, leaving it very vulnerable to a correction in global risk appetite," the report said. "We recently shifted our global EM tactical strategy bias back to defensive, and accordingly turned bearish on Argentine debt."

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