Temir Zholy, Isbank sell notes as deal flow resumes; Sandy damage keeps EM trading thin

By Christine Van Dusen

Atlanta, Nov. 1 - Volumes for emerging markets assets remained thin on Thursday as many New York-based traders spent the session in remote offices or in hours-long gas lines while attempting to reassure investors that business would soon get back to normal.

Meanwhile, signs of life were seen in the primary market, where Kazakhstan Temir Zholy Finance BV and Turkey's Turkiye Is Bankasi AS (Isbank) priced new deals and numerous others planned issues.

On that list were Russia's OJSC VTB Bank, Turkey's Calik Holding AS, Honduras' Central American Bank for Economic Integration (Cabei), Korea Southern Power Co. Ltd., Brazil's Marfrig Alimentos SA and Brazil's Cielo SA.

Thursday also saw deals being prepped by Banco Santander Mexico SA, Brazil's Usina Sao Joao Acucar e Alcool SA (USJ), the Republic of Angola, Kazakhstan's Zhaikmunai LP, China's Li & Fung Ltd. and China SCE Property Holdings Ltd.

Most trading of emerging markets bonds was flat, though some of the more volatile bonds did manage to outperform somewhat, according to a report from UFS Investment Co.

Bonds from Ukraine, for example, were well bid, with the sovereign curve up as much as ¼ point, said Svitlana Rusakova of Dragon Capital.

The sovereign's 2020s were seen at 104 bid, 105 offered while Ukraine's 2021s were spotted at 105¼ bid, 106¼ offered.

"The negative third-quarter 2013 GDP number was predictably ignored as it seems Ukraine is now all about global risk-on and -off and the IMF," she said. "No aggressive lifting though, with a few good bids hit."

Yields are close to their all-time highs, she said, so "such behavior is understandable. The election outcome is moderately positive, but progress on the IMF front is the key indicator right now."

Temir Zholy sells notes

In its new deal, railway operator Kazakhstan Temir Zholy Finance priced a $300 million add-on to its 6.95% notes due July 10, 2042 at 120.244 to yield 5.55%, a market source said.

Barclays, HSBC and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

The original $800 million issue of 6.95% notes due 2042 priced in July at par to yield 6.95%, or Treasuries plus 427.5 basis points.

Isbank prices bonds

Turkish lender Isbank priced a $500 million issue of 3 7/8% notes due Nov. 7, 2017 at 99.327 to yield mid-swaps plus 320 bps after being talked at the mid-swaps plus 337.5 bps area.

Deutsche Bank, JPMorgan, UFJ Mitsubishi Securities and Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S deal.

This was yet another in a line of recent deals from Turkish banks, which have been met with "wavering demand by investors," a London-based analyst said.

Calik sets talk

In other news from Turkey, Calik Holding set initial price talk at 10¼% to 10½% for its planned $300 million issue of five-year notes, a market source said.

Citigroup and Goldman Sachs are the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used to refinance existing debt.

Calik, an Istanbul-based industrial conglomerate, had initially planned to do a dollar deal in May but postponed due to market conditions.

GarantiBank looks strong

Also from Turkey, GarantiBank reported better-than-expected earnings for the third quarter, the London analyst said.

"The bank is set for a strong fourth quarter and year-end results with expected strong recovery of the securities' yield, further supported by increasing loan spreads," she said. "Overall loan growth remained modest, surpassed by stronger-than-sector average growth in deposits."

She remains constructive on the credit, and the Turkish lending sector as a whole, going into the fourth quarter.

Li & Fung gives guidance

In deal-related news, Chinese global trading group Li & Fung set final guidance at 6% to 6 1/8% for its planned $500 million issue of perpetual notes, a market source said.

Citigroup and HSBC are the bookrunners for the notes.

"Expect more moderate corporate issuance levels in November following an extremely active October ... due to increased macro risk and stretched spread levels," analysts Manjesh Verma and Oscar Chow of UFJ Mitsubishi said in a report.

Cabei mulls notes

Also on Thursday, Honduran microfinance lender Cabei was pondering a three- to five-year issue of up to RMB500 million notes in 2013, a market source said.

Cabei may also issue euro-denominated notes.

And Korea Southern Power mandated Barclays and Citigroup for a roadshow starting Nov. 5 and traveling through Zurich, London, Singapore and Hong Kong.

Korea Southern Power is part of Korea Electric Power Corp., the largest electric utility in South Korea.

Brazil issuers plan roadshows

For another roadshow, Brazil's food processing company Marfrig Alimentos mandated Bank of America Merrill Lynch for a roadshow in London, a market source said.

And Banco Santander Mexico revised its roadshow schedule as a result of Hurricane Sandy.

The marketing trip began Thursday and will end on Nov. 5.

Also from Brazil, credit and debit card operator Cielo will set out on a roadshow on Nov. 5 for a possible issue of notes via leads BB Securities, Bradesco BBI and Goldman Sachs, a market source said.

The marketing trip for the Rule 144A and Regulation S deal will be begin in London and travel to Boston and New York before concluding on Nov. 8 on the West Coast.

And sugar and ethanol producer USJ set initial price guidance at the mid-10% area for a dollar-denominated issue of seven-year notes via Credit Suisse, HSBC and Itau BBA in a Rule 144A and Regulation S deal.

Angola, VTB deals ahead

Angola is planning an issue of dollar-denominated notes that could total as much as $2 billion and launch in 2013, a market source said.

And Russia's VTB Bank is planning to price a $1.25 billion add-on to its 9½% perpetual notes with VTB Capital, according to a company filing.

Issued by special-purpose vehicle VTB Eurasia Ltd., the notes will be used to fund a subordinated loan to VTB Bank.

The original issue of $1 billion notes priced in July at par via Citigroup, UBS and VTB Capital in a Rule 144A and Regulation S deal.

Zhaikmunai sets guidance

Kazakhstan-based oil and gas exploration and production company Zhaikmunai set initial price talk at 7¼% to 7½% for a planned issue of seven-year dollar notes, a market source said.

Bank of America Merrill Lynch, Citigroup and VTB Capital are the bookrunners for the Rule 144A and Regulation S deal.

Romania notes oversubscribed

The final book for Romania's €1.5 billion 4 7/8% notes due Nov. 7, 2019 - which priced Wednesday at 99.047 to yield mid-swaps plus 370 bps - was €4.7 billion from 285 orders, a market source said.

Deutsche Bank, Barclays, Citigroup and HSBC were the bookrunners for the Regulation S deal.

About 35% of the orders came from Europe, 27% from Austria and Germany, 23% from the United Kingdom, 10% from the offshore United States and 5% from Asia and others.

Funds accounted for 48%, bank and retail 22%, insurers and pensions 17% and hedge funds 13%.

Healthy book for SOHO

Beijing-based property developer SOHO China Ltd.'s $1 billion offering of senior notes in two tranches drew a significant number of orders, a market source said. according to a company announcement.

The company sold $400 million five-year notes with a 5¾% coupon at par. Those notes drew $6 billion from more than 200 investors.

SOHO also sold $600 million 10-year notes with a 7 1/8% coupon at par, which attracted $2.25 billion from 150 investors.

HSBC, Morgan Stanley, Standard Chartered Bank, Barclays and Goldman Sachs are the bookrunners for the Regulation S deal.

October sentiment supportive

Looking back at the month of October, sentiment was mostly supportive of emerging markets assets, according to a report from UFJ Mitsubishi.

European credit markets saw spreads tighten during the month despite some negative corporate results.

"With seemingly unstoppable inflows into credit funds and relatively flat net new issuance to the market, spreads moved tighter almost without exception in both telecoms and utilities," the report said. Peripheral names performed well as immediate concerns over the euro zone continued to recede."

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