Issuance from Gazprom; Turkcell notes inch lower, Pakistan improves; Asia remains firm

By Christine Van Dusen

Atlanta, Oct. 8 – Russia’s OJSC Gazprom sold notes on a Thursday that saw the new issue from Turkey’s Turkcell Iletisim Hizmetleri AS dip while Asian bonds consolidated.

“We did almost rally for a week, but given the 50 basis points-plus spread tightening in liquid sovereigns, it was inevitable that we were going to take a pause,” a London-based trader said. “Risk markets turned, with U.S. Treasuries better bid and the S&P 500 off its highs.”

Five-year credit default swaps spreads for Turkey, South Africa and Russia started the day 15 bps off their tightest levels, while Brazil was 40 bps wider.

“The Turkey sovereign traded super-well, only to get hit into the close, and shorts looked to push the trade,” he said. “It does feel like there is a short base in cash now, as any stability in the market leads to the Street bidding paper.”

The new issue of notes from Turkey’s Turkcell – $500 million 5¾% notes due 2025 that priced at 98.509 to yield 5.95% – traded Thursday morning at a high of 98.65, a low of 97.50 and was most active in the 98 area, another trader said.

BNP Paribas Securities Corp., Citigroup Global Markets Inc. and HSBC Securities were the bookrunners for the Rule 144A and Regulation S deal.

“Turkcell was hit pretty quickly on the break by the long-term investment community, as syndicates sucked out new issue premiums,” he said.

Bonds from Asia consolidated on Thursday but the tone remained firm, with spreads closing unchanged to 3 bps tighter, a trader said.

Laggards played catch-up amid profit-taking for recent issues, he said.

“China financials were unchanged,” he said. “India banks closed couple tighter.”

Pakistan performs

The 8¼% notes due 2025 that Pakistan recently priced at par traded well on Thursday, a trader said.

“A solid few sessions, as potential profit takers held back and let the curve rip on the rally,” he said. “The 2025s traded well and are now looking to test a 500 bps z-spread, which is where I think you may now see profit-takers.”

The notes saw some two-way action on Thursday, he said.

“If the market holds, high-yield sovereigns will grind towards liquid sovereigns as investors look for pick up,” he said.

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

Gazprom sells notes

In its new deal, Russia’s Gazprom – through special purpose vehicle Gaz Capital SA – priced €1 billion 4 5/8% loan participation notes due Oct. 15, 2018, according to a company release.

The notes were talked at 4¾% to 4 7/8%.

Banca IMI, JPMorgan and Unicredit Bank were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used to finance a loan to PJSC Gazprom, which will use the loan for general corporate purposes.

Gazprom is a Moscow-based natural gas producer.

“Still a big compliance and legal overhang for some investors due to the general sanctions, but over the course of this year we have seen this become much less of an issue,” a trader said.

© 2015 Prospect News.
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