Cemex prices deal as EM spreads tighten, buying increases; Chinese issuers to tap market

By Christine Van Dusen

Atlanta, Jan. 4 - Mexico's Cemex SAB de CV attracted heavy investor interest for an new issue of notes on a Tuesday that featured higher Treasury yields, tighter spreads and strong buying following better-than-expected economic data out of the United States.

Orders for U.S. factory goods climbed 0.7% in November, contrary to expectations of a 0.1% decline, which gave a little boost to risk appetite. The JPMorgan Emerging Markets Bond Index Plus started the day about 4 basis points tighter before finishing 13 bps tighter as commodity prices backed off a bit but remained high.

Tuesday also saw two Chinese corporate issuers, China South City Holdings and Texhong Textile Group Ltd., planning new deals.

"The markets are off to a very solid start," a London-based trader said.

Cemex prints notes

In one of the first new deals of the new year, Cemex priced $1 billion 9% notes due Jan. 11, 2018 at 99.364 to yield 9 1/8%, an informed source said.

The deal was announced as a benchmark-sized offering with initial whispers of a yield in the mid-9% area before guidance was set at the 9 3/8% area. By mid-afternoon Tuesday, the book was more than $4.1 billion from more than 258 accounts, with 60% from dedicated EM funds and 40% from traditional U.S. high-yield accounts.

"Some large money is still looking," the source said. "It's very good quality. There were three orders of over $100 million from high-quality Boston, West Coast and Midwest-based accounts, four $75 million to $70 million offers and 15 $50 million to $60 million orders. It's a predominance of real money, with some hedge funds."

Investor reaction wasn't all that surprising, he said, given that Cemex was well received during a non-deal roadshow held in early December. The deal could have been done that month, he said, but the issuer decided to wait until the new year to ensure full investor participation.

"The strategy paid off, as Cemex bonds have rallied in the last three weeks by 50 bps," he said.

Chinese deals in works

China South International Industrial Materials City Co. Ltd. (China South City Holdings) is planning an issue of senior notes via UBS and BOC International, according to a filing from the logistics and wholesale shipping holding company.

Proceeds from the Rule 144A and Regulation S transaction will be used for general corporate purposes and to fund properties under development and planned for future development.

Also from China, Texhong Textile Group is planning an issue of senior notes that will be marketed on a roadshow in Asia, Europe and the United States starting Wednesday, according to a company filing.

Deutsche Bank is the bookrunner for the Rule 144A and Regulation S transaction.

Proceeds will be used for general corporate purposes and to repay an outstanding credit facility, to redeem $25 million guaranteed index-linked notes due 2012 and for capital expenditures, including expansion of production facilities.

Buying resumes

In the secondary market, "it was a traditional buying fest. It's broadly a good 8 bps to 13 bps tighter versus December," the London-based trader said. "Many higher-beta names were up as much as 20 bps to 35 bps."

One standout was Abu Dhabi-based Aldar Properties PJSC's 8¾% notes due 2014, which priced at par and were seen trading at 109.

"They're having a super-strong start," he said. "They're a good 25 bps tighter."

The tone also was solid for Qatar, which was about 10 bps to 15 bps tighter. And Dubai was 35 bps tighter.

"Dubai's five-year trades at 407, very near the important 400 level," he said. "It's a feeding frenzy out there at the moment, with only a severe sell-off in U.S. Treasuries or a bucket-load of supply likely, in the short-term, to put a line in the sand."

Month over month, Dubai has tightened 100 bps while Dubai Water and Electricity Authority has tightened by 110 bps. Qatar's Qtel International Finance Ltd., meanwhile, has tightened as much as 60 bps since December.

"It's largely irrelevant what the U.S. Treasuries do when Dubai 2020s close up 3 points versus the week before Christmas," the trader said.

Bahrain, Qatar in focus

Tuesday also saw Bahrain's 5½% notes due 2020 - which were seen trading at 101.82 bid, 102.12 offered before the holiday break - close the European session at 101.75 bid, 102.25 offered.

And the 5% notes due 2015 from the Kingdom of Bahrain's wealth fund, Bahrain Mumtalakat Holding, were seen trading Tuesday at 101.25 bid, 101.75 offered. On Dec. 22, they were trading at 100.62 bid, 101.02 offered.

Some valuations are getting stretched, the London trader said. Qatar National Bank, which came to market in November with $1.5 billion 3 1/8% notes due 2015 at 99.017 to yield mid-swaps plus 180 bps, was at 120 bps bid on Tuesday.

Still, he said, "the market is ready for all the much-talked-about supply."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.