Issuance pipeline now open with deals from Danga Capital, PKP, CAF; investors buy up risk

By Christine Van Dusen

Atlanta, Oct. 13 - Malaysia's Danga Capital Bhd., Poland's Polskie Koleje Panstwowe SA and Venezuela's Corporacion Andina de Fomento sold notes on a choppy Thursday with mixed spreads and a solid open on the secondary market for names like Ukraine, Kazakhstan's BTA Bank, Cairo-based African Export-Import Bank and Nigeria.

"[It was a] choppy session with a very solid morning followed by a more balanced afternoon. Spreads are a mixed bag, really, just totally depending on Street position and the client inquiry on any given day or hour," a trader said. "Just as we had a panic lift on credit default swaps last Tuesday, it almost felt like we had the panic hitting this morning. I have used this rally to lighten up a little and am trying to trade ranges and sell on the upticks."

The Markit iTraxx SovX index opened 5 basis points wider at 303 bps.

"But that hasn't stopped retail investors from yet more buying of Russia risk on the open, which is keeping the bonds well bid," a London-based trader said.

This came against the backdrop of mixed headlines for the day, including new free trade agreements from the United States and resulting equity market strength in Asia.

"Less optimistic is the reduced export growth in China and poor results from Carrefour," he said.

Danga Capital prints notes

In its new deal, Malaysia's Danga Capital Bhd. priced an RMB 500 million issue of 2.9% notes due 2014 at par to yield 2.9%, a market source said.

BOCI, CIMB and RBS were the bookrunners for the Regulation S-only transaction, the world's first renminbi-denominated issue of sukuk notes.

The notes were guaranteed by Khazanah Nasional Bhd., the investment holding arm of Malaysia, based in Kuala Lumpur.

PKP, CAF sell bonds

Also on Thursday, Poland's PKP priced a €180 million issue of 5¾% notes due Oct. 20, 2016 at 99.636 to yield 5.836%, or mid-swaps plus 375 bps, a market source said.

Goldman Sachs and RBI were the bookrunners for Regulation S notes issued by PKP, the parent company of Grupa PKP, the state-owned rail operator for the Republic of Poland.

And Venezuela-based lender CAF priced a CHF 125 million issue of 2¾% notes due Feb. 3, 2017 at 100.714 to yield mid-swaps plus 185 bps, an informed market source said.

Credit Suisse and Deutsche Bank were the bookrunners for the deal.

China Merchants sets talk

In other deal-related news, commercial lender China Merchants Bank Co. Ltd. set price talk for its planned issue of $300 million three-year notes at the mid-swaps plus 300 bps area, a market source said.

ANZ and Standard Chartered are the bookrunners for the deal, which is expected to price by the end of the week.

And Indonesia has mandated Citigroup, HSBC and Standard Chartered Bank for a roadshow starting Oct. 15 and traveling through the Middle East, a market source said.

A dollar-denominated sukuk issue of notes may follow, pending market conditions.

"It seems the market is set up for some supply," a trader said.

Pemex oversubscribed

The final book for Mexico-based petrochemical company Petroleos Mexicanos SAB de CV's $1.25 billion add-on to its 6½% notes due 2041 was $5.75 billion from 219 accounts, a market source said.

The notes priced Wednesday at 102.131 to yield 6.339%, or Treasuries plus 315 bps, via BNP Paribas and Deutsche Bank in a Rule 144A and Regulation S deal.

About 72% of the orders came from the United States, 23% from the United Kingdom, 3% from Europe and 2% from other countries. Investment managers accounted for 74%, hedge funds 14%, insurers 6%, banks and financial institutions 4% and others 2%.

"Definitely a plus is Pemex getting their $1.25 billion tap away," the London-based trader said. "It came at just a 20 bps discount to the curve, which has set a good precedent."

Said another trader, "It's the usual big order book."

Ukraine opens strong

In trading, Ukraine and its quasi-sovereigns opened very strong on Thursday while Turkey started out the session relatively quiet, a trader said.

"Retail investor interest on corporates continues," he said. "Also, on the local press it is mentioned that HSBC might be interested in acquiring 20% of Finansbank from National Bank of Greece. Thus it has been outperforming other banks, which justifies the 5-point recovery in the last couple of days."

Also from Turkey came whispers that the sovereign may be looking to issue 10-year dollar-denominated notes. "I'm also hearing that Yuksel Insaat may be in town for client meetings between the 20th and 21st," he said.

By noon ET, Turkey's longer-duration sovereign bonds were up more than a point.

"But they are closing the day slightly in the red," a trader said. "The retail investor appetite for corporates still persists though. We were active on Yasar Holdings, Yuksel Insaat and Akbank's 2015s today."

Kazakh banks get busy

Looking to Kazakhstan, the banks there finally came back to life, a trader said.

"We've seen the first street trade in Alliance Bank JSC in over a month," he said. "The 2017s are trading at between 68 and 70."

BTA Bank's 2018s were seen trading between 49 and 51 while its 2025s were trading at between 24 and 26.

"BTA is very much the star of the show again, with bonds now bid at 50," the London trader said later in the session.

Kazkommertsbank's 2018s were seen trading between 81 and 83 early Thursday.

Afrexim, Nigeria eyed

From Africa, more trading activity was seen on Thursday, a trader said, with investors showing interest in Cairo-based African Export-Import Bank and Nigeria.

"There's been a decent comeback by Afrexim over the week, especially with the 2014s," he said, noting that the bonds were trading Thursday at 106.75 bid, 108.25 offered.

Small selling was seen for GTB Finance in favor of Nigerian sovereign bonds.

"Jordan's 2015s power ahead at 964.75 bid versus trading at 92 last Tuesday," he said, noting "good regional support on that paper."

Middle East in focus

Looking to the Middle East, Bahrain was well offered and Mumtalakat bonds were well bid.

"Sukuks had a solid morning but definitely faded a little throughout the afternoon," a trader said.

Good interest was seen for Dubai Holding. Its 2014s closed up about a point at 81 bid, 82 offered, or 350 bps better on the week, he said.

Buyers also were seen for the company's 2012 notes. "The market is switching to the belief that this bond will be paid down in full like their little Swiss franc deal was," he said.

Abu Dhabi National Energy Co. snapped back 30 bps to 40 bps versus a week ago, a trader said.

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