Oil rally pumps up EM debt; Ezdan, Slovenia, State Grid do deals; Brazil in focus again

By Christine Van Dusen

Atlanta, May 11 – Qatar’s Ezdan Holding Group, Slovenia and State Grid Corp. of China sold notes on a firm Wednesday for emerging markets assets, with the rally in oil boosting Latin American debt.

“It’s a calm morning in terms of news flow, with markets opening slightly firmer,” a London-based strategist said. “The positive moves in EM are partly driven by higher oil prices, due to security concerns in the Niger Delta, exemplified by Shell’s and Chevron’s decision to evacuate staff for safety.”

The market seemed to be absorbing most of the new paper from emerging markets issuers “with ease,” a London-based trader said. “Great performance, given the heavy supply penciled in ahead of the summer.”

Turkey remained on radar screens, with its bonds putting in “confounding” performance as “dollar bonds are holding the recent retracement while the lira has started to weaken again,” he said. “My only explanation is the positioning.”

Many investors have been short Turkey risk “for a while,” he said, “versus the longs that see no real change in the political outlook, who are happy to clip the carry.”

Five-year credit default swaps spreads for the sovereign were trading on Wednesday morning at 265 basis points after a wide of 275 bps last week, he said.

“On negative headlines we have only had the Street and a small amount of fast-money selling,” he said. “For this to break wider, I think it needs some strategic shifts.”

Brazil was in focus again, as its senate on Wednesday was set to decide on President Dilma Rousseff’s impeachment.

If the impeachment does move forward, it “would see her stepping down temporarily while under trial,” the strategist said. “In such a case, Michel Temer, the current vice-president, would take over her responsibilities. The speaker of the lower house in the meantime has reversed his decision to annul the impeachment vote from April.”

Brazil CDS tighten

Brazil’s five-year credit default swaps spreads closed Wednesday at 323 bps from 335 bps, while Mexico’s moved to 164 bps from 165 bps, a New York-based trader said.

“Cash prices move higher as the U.S. Treasury rally and spread tightening help to prop up levels above yesterday’s closing context,” he said. “We did see some curve-flattening in external bonds today, which followed the trend in the U.S. Treasury market.”

Latin American high-yield names performed well, with Venezuela’s 2027s closing at 43 from 41.75 and PDVSA’s 2017s finishing at 58.25 from 57.50.

Argentina unchanged

Argentina’s Bonar 2024s were mostly unchanged at 109.40 while its 2026s traded at 102.10 from 101.80, the New York trader said.

“Flows on the light side today, with activity really tapering off late in the session,” he said. “Tonight all eyes are on the impeachment developments in Brazil.”

Meanwhile, trading of Middle Eastern assets was busy, a London-based trader said.

Perpetual bonds lagged, though, and Abu Dhabi-based holding company Mubadala Development Co.’s 2023s were “a tad quieter,” he said.

Boubyan moves higher

The new issue of notes from Kuwait’s Boubyan Bank – $250 million 6¾% perpetual notes that priced this week at par – traded Wednesday morning at 102 1/8 bid, 102 5/8 offered, a trader said.

“We consider this as too tight for a sub-benchmark-sized and unrated perpetual transaction,” he said. “Also, we consider Boubyan’s loan book as relatively unseasoned – given high geographical concentration and loan growth of 20%, year over year – while being a small-sized Islamic lender.”

Boubyan Capital, HSBC and Standard Chartered Bank were joint global coordinators for the Regulation S sukuk. Boubyan Capital, Dubai Islamic Bank, Emirates NBD Capital, HSBC, KFH Capital, National Bank of Kuwait and Standard Chartered Bank were joint lead managers and bookrunners.

The notes “nearly reached 103 today, a superb effort from this one, but arguably looking rich here versus some peers,” another trader said.

BankMuscat trades up

Oman-based BankMuscat’s recent $500 million 3¾% notes due 2021 that priced at 99.311 to yield mid-swaps plus 260 bps closed Wednesday at 101.15 bid, 101.35 offered, a trader said.

“Good two-way in that context,” he said.

Bank ABC, Bank Muscat SAOG, Citigroup, Credit Agricole CIB, HSBC, MUFG Securities, National Bank of Abu Dhabi and Standard Chartered Bank as joint lead managers and bookrunners for the Regulation S offering.

“The entire bank space traded very well, with a slew of brokers and semi-professionals trying to source paper” from the Middle East, he said.

Issuance from Ezdan

Qatar-based real estate developer Ezdan sold $500 million 4 3/8% notes due May 18, 2021 at 99.446 to yield 4½%, or mid-swaps plus 333 bps, a market source said.

HSBC and Mashreq were the joint global coordinators for the Regulation S sukuk. Barwa Bank, Emirates NBD Capital, HSBC and Mashreq were the lead managers and bookrunners.

“This one has had an inauspicious start, just trading now at 99.125,” a trader said Wednesday.

Slovenia sells notes

Slovenia printed €1.25 billion in taps of its notes due July 28, 2025 July 28, 2025 and March 3, 2032, a market source said.

The €750 million 2 1/8% notes due 2025 priced at 106.240 to yield 1.397%, or mid-swaps plus 95 bps. The notes were talked in the 98 bps area.

The €500 million 2¼% notes due 2032 priced at 99.667 to yield 2.275%, or mid-swaps plus 135 bps, following talk in the 137 bps area.

Barclays, Deutsche Bank, Goldman Sachs and JPMorgan were the bookrunners for the Regulation S deal.

The notes were being issued alongside a tender offer, according to a filing from the sovereign.

The sovereign is conducting a tender offer for each of its $2.25 billion 5½% notes due 2022, $2.5 billion 5.85% notes due 2023 and $2 billion 5¼% notes due 2024.

State Grid prints bonds

China’s State Grid priced a two-tranche issue of €1 billion notes due May 19, 2022 and 2025, a market source said.

The deal included €500 million 1¼% notes due 2022 that priced at 99.759 to yield 1.292%, or mid-swaps plus 120 bps.

The €500 million 1¾% notes due 2025 priced at 98.982 to yield 1.874%, or mid-swaps plus 145 bps.

HSBC, Goldman Sachs, Morgan Stanley, Bank of China, ICBC, JPMorgan, CCB, Citigroup, Mizuho Securities and UBS were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used for general corporate purposes.

The power distributor is based in Beijing.

Hipotecario to price tap

In deal-related news, Argentina’s Banco Hipotecario SA is planning to price a tap of its dollar-denominated notes due Nov. 30, 2020 (B3/B-/), a market source said.

BofA Merrill Lynch and Itau are the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used for working capital.

Hipotecario is a Buenos Aires-based commercial bank.

Latvia draws orders

The final book for Latvia’s new €650 million 1 3/8% notes due May 16, 2036 that priced Tuesday at 97.617 to yield mid-swaps plus 50 bps was about €2 billion, a market source said.

HSBC, JPMorgan, Natixis Securities and Swedbank were the bookrunners for the Regulation S deal.

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