Korea Development, Indonesia price bonds; spreads narrow; investors like new Russian deal

By Christine Van Dusen

Atlanta, Sept. 10 - Korea Development Bank and Indonesia printed bonds on a fairly active and positive day for emerging markets bonds, particularly the new issues from Russia and South Africa, as concerns about Syria remained on the market's mind.

"U.S. Treasuries continue to remain stable this morning at 2.94%," a London-based analyst said. "We expect issuance to continue."

The Markit iTraxx SovX CEEME ex-EU index spread on Tuesday opened at 244 basis points over Treasuries, tighter by 40 bps. The Markit iTraxx Crossover index spread - seen Monday at 407 bps - narrowed to 394 bps on Monday.

"Pretty solid effort by the market today," a London-based trader said. "Spreads perform."

The slightly better tone on the situation in Syria brought out buyers of perpetual notes, Dolphin Energy's 2021s and Bahraini names.

"Perpetuals saw some retail investor demand," he said. "Dubai corporate and government names ticked higher, with the usual demand for Dubai Electricity and Water Authority, DPWorld and Emaar Properties."

Abu Dhabi Commercial Bank's 3 1/8% notes ticked higher, trading with an 88 handle.

"Has always been cheap, but the technicals have overridden that value," he said. "Perhaps this has changed over the past week?"

Investors also showed good interest in Qtel International's 2019s.

"However, it feels like there's paper around on the longer-dated Qtels," he said.

From Latin America, some corporate bonds managed to move up while others remained flat, a New York-based trader said.

Buyers were especially prevalent for bonds from Mexico's Cemex SAB de CV, which was pushed about a point higher at the close.

"Bank paper on the whole is still heavy," he said. "Colombia and Chile banks are also not benefitting from the uptrade, save for Bancolombia paper, which had been beaten hard."

Ematum moves down

Taking a look at Africa, the recent bonds from Mozambique's Ematum were down a point from last week's issuance, a trader said.

"The main activity centered around the return of South Africa to the capital markets with a long 12-year offering," he said.

The sovereign priced $2 billion 5 7/8% notes due 2025 at 98.422 to yield Treasuries plus 315 bps via Deutsche Bank, Rand Merchant Bank and Standard Bank in a Securities and Exchange Commission-registered deal.

"Closing at Treasuries plus 304 bps on the bid side, with the secondary curve under pressure versus decent demand near 99," the trader said. "The curve has normalized somewhat today, but it's to the detriment of the older bonds."

South Africa sees 'flippers'

South Africa's 2024 notes - which were seen at 94 bid, 94¾ offered on the morning of the announcement - traded between 98½ and 99½ after the deal priced.

"The usual slew of flippers were seeking the bid," the trader said. "It did settle down as they day went on however."

By the end of the European session on Tuesday, the new notes were trading at 99.05 bid, 99.30 offered.

The deal drew a final order book of $7.5 billion.

Meanwhile, bonds from Morocco were well-supported, the trader said.

Russia deal draws orders

Russia's new four-tranche issue of $6 billion and €725 million notes due 2019, 2023 and 2043 drew significant investor interest, a market source said.

The deal drew a total order book of more than $15 billion.

The transaction included $1.5 billion 3½% 2019 notes that priced at 99.195 to yield 3.664%, or Treasuries plus 195 bps. The tranche attracted $4.4 billion in orders.

The second tranche of $3 billion 10-year 4 7/8% notes priced at 98.162 to yield 5.112%, or Treasuries plus 220 bps. The tranche attracted $6.2 billion in orders.

Investors like Russia notes

Another tranche from Russia's new deal - $1.5 billion in 5 7/8% 30-year notes - priced at 97.187 to yield 6.08%, or Treasuries plus 220 bps. The tranche attracted $4 billion in orders.

The deal also included €725 million 3 5/8% notes due 2020 that priced at 99.533 to yield mid-swaps plus 185 bps.

Barclays, Deutsche Bank, Gazprombank, Renaissance Capital, RBS and VTB Capital are the bookrunners for the Rule 144A and Regulation S deal.

Indonesia sells bonds

In its new deal, Indonesia priced a $1.5 billion issue of 6 1/8% Islamic bonds due 2019 at par to yield 6 1/8%, a market source said.

The notes were talked at a yield in the 6¼% area.

Citigroup, Deutsche Bank and Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S sukuk.

The notes were issued by Perusahaan Penerbit SBSN Indonesia III.

New deal from KDB

Korea Development Bank priced a $750 million issue of 3% notes due 2019 at 99.223 to yield Treasuries plus 140 bps, a market source said.

The notes priced at the tight end of talk, set at Treasuries plus 140 bps to 145 bps.

Citigroup, Credit Suisse, Deutsche Bank, Korea Development Bank, Mizuho Securities and Standard Chartered Bank were the bookrunners for the SEC-registered deal.

TMB picks bookrunners

In other deal-related news, Thai Military Bank (TMB Bank) mandated HSBC, ING and Standard Chartered Bank to lead a roadshow starting Thursday, a market source said.

A dollar-denominated issue of Regulation S notes could follow.

The lender is based in Bangkok.

PTH to issue notes

Polish Television Holding BV (PTH) plans to price a €300 million offering of seven-year senior secured PIK toggle notes on Wednesday, according to a market source.

Joint bookrunner JPMorgan will bill and deliver. Deutsche Bank and Nomura are also joint bookrunners. BNP Paribas it the co-manager.

The Rule 144A and Regulation S for life notes become callable in three years.

The Polish broadcaster plans to use the proceeds to refinance its notes due 2017.

PTH is the parent of TVN, which priced a €430 million issue of 7 3/8% senior notes due 2020 at par to yield 7.378% last week.

Ecopetrol talks notes

Also on Tuesday, Bogota-based petroleum company Ecopetrol SA set initial talk for a dual-tranche issue of dollar-denominated notes due in five and 10 years.

The five-year notes were talked at a spread in the Treasuries plus 300 bps area.

The 10-year notes were talked at a spread in the Treasuries plus 325 bps area.

BofA Merrill Lynch and Morgan Stanley are the bookrunners for the SEC-registered deal.

The proceeds will be used for general corporate purposes, including capital expenditures.

Chinese deal oversubscribed

The final book for China ZhengTong Auto Services Holdings Ltd.'s new $335 million issue of 4½% notes due 2018 was about $900 million from 95 accounts, a market source said.

The notes priced at 99.748 to yield 4.561%, or Treasuries plus 285 bps, with JPMorgan, Bank of China and Credit Suisse in a Regulation S offering.

The deal drew 82% of its orders from Asia and 18% from Europe.

Fund managers picked up 32%, insurers 30%, banks 22%, retail 11% and others 5%.

Paul A. Harris contributed to this report.

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