EM spreads widen further; Halkbank, Bharti Airtel, Tanzania, Shun Tak, HDFC deals on deck

By Christine Van Dusen

Atlanta, Feb. 22 - Emerging markets spreads finished the week wider as several issuers took steps toward doing new deals, including Turkey's Turkiye Halk Bankasi (Halkbank), India's Bharti Airtel Ltd., the Republic of Tanzania, China's Shun Tak Holdings Ltd. and India's HDFC Bank Ltd.

The Markit iTraxx SovX index spread moved out 2 basis points on Friday to 177 bps over Treasuries. The corporate index widened 1 bp to 229 bps over Treasuries.

Against this backdrop, bonds from some Russian names - such as Lukoil and Novatek - were firmer on Friday while the euro-denominated notes from Vnesheconombank (VEB) weakened. Turkish corporates also finished the week about 5 bps to 7 bps wider, a London-based analyst said.

Overall, corporate bonds from emerging markets remain a good bet for investors, even though the potential for higher Treasury yields poses some risk, according to a report from Barclays.

"Most signals still suggest a positive environment for taking EM credit risk," the report said. "Fundamentals have stabilized and valuations are compelling, especially versus EM sovereigns."

The bank's favorite bonds come from Russian quasi-sovereigns and banks as well as Latin American subordinated banks and Chinese property companies.

In other news, inflows into emerging markets bond funds totaled $905 million for the week, down slightly from the previous week, according to a report from data tracker EPFR Global.

About $828 million went into funds with local-currency mandates. Hard-currency funds saw outflows of $83 million.

Halkbank, Bharti Airtel deals

Turkey-based lender Halkbank is planning a lira-denominated issue of global notes, a market source said.

No other details were immediately available on Friday.

And India-based mobile telecommunications company Bharti Airtel has mandated Barclays, BNP Paribas, Citigroup, Deutsche Bank, HSBC, Standard Chartered Bank and UBS for a roadshow to market an issue of dollar notes.

The marketing trip for the Rule 144A and Regulation S deal will begin Feb. 25 and take place in Asia, Europe and the United States.

HDFC mandates bookrunners

Also from India, HDFC Bank tapped BofA Merrill Lynch, Citigroup, JPMorgan and Standard Chartered Bank as bookrunners for a dollar-denominated issue of notes and an accompanying roadshow, a market source said.

The roadshow begins Feb. 25 and will travel through Hong Kong, London and Singapore.

A Regulation S issue is expected to follow.

Tanzania taps Standard Bank

For another upcoming deal, Tanzania mandated Standard Bank as the bookrunner for a dollar-denominated issue of Regulation S notes, a market source said.

The notes are expected to carry a tenor of seven years.

And China-based Shun Tak is on a roadshow for a dollar-denominated issue of notes with bookrunners Credit Agricole and HSBC in Hong Kong and Singapore.

The notes are part of a $1 billion medium-term note program, established on Feb. 20.

Proceeds from notes issued under the program will be used for general corporate purposes.

Privatbank sells notes

This news followed the late-Thursday pricing of Ukraine-based Privatbank's $175 million issue of 10 7/8% notes due 2018 at par to yield 10 7/8%, a market source said.

The notes were talked at a yield in the 10 7/8% area.

Credit Suisse, JPMorgan and UBS Investment Bank were the bookrunners for the Rule 144A and Regulation S deal.

CIFI cancels deal

China's CIFI Holdings Group Co. Ltd. has canceled plans for a dollar-denominated issue of notes due to market conditions, a market source said.

Citigroup, Standard Chartered Bank, Deutsche Bank, HSBC and RBS were the bookrunners for the Regulation S deal.

The proceeds were to be used for refinancing existing indebtedness, the acquisition of new projects or land for development, the development of existing projects and for general corporate purposes.

CIFI is a Shanghai-based property developer.

Kexim oversubscribed

The final book for Export-Import Bank of Korea's (Kexim) new $500 million issue of 1¾% notes due 2018 was $1.8 billion from more than 100 accounts, a market source said.

The notes priced this week at 99.672 to yield Treasuries plus 95 bps via BofA Merrill Lynch, SEB Enskilda and Pierce, Fenner & Smith in a Securities and Exchange Commission-registered deal.

About 47% of the orders came from the United States, 32% from Europe and 21% from Asia.

Asset managers picked up 55%, banks 31%, insurance and pension funds 5%, companies 4% and other investors 5%.

The proceeds will be used to extend loans to support projects that promote the transition to low-carbon and climate-resilient growth.

Slovakia notes attract orders

Also oversubscribed was Slovakia's €1.75 billion issue of 3% notes due 2023 that priced at 98.898 to yield 3.13%, or mid-swaps plus 122 bps.

The final book was more than €2.2 billion from 190 accounts, with 75% from Europe and Asia and 25% from Slovakia.

Fund managers accounted for 37%, banks 34%, insurance and pension funds 20%, central bank and official institutions 5% and others 4%.

Deutsche Bank, ING, Societe Generale and Erste Group were the bookrunners for the Regulation S deal.

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