Abu Dhabi's TAQA, unit of Brazil's Petrobras sell notes on stronger day for EM assets

By Christine Van Dusen

Atlanta, Dec. 5 - Abu Dhabi National Energy Co. (TAQA) and Brazil's Petrobras International Finance Co. sold notes on Monday as emerging markets assets rode a wave of better sentiment after German chancellor Angela Merkel and French president Nicolas Sarkozy announced plans for tougher fiscal rules in the European Union.

"The markets seem to be assuming that Merkel and Sarkozy will deliver something pretty special for European Union sovereigns this week," a London-based trader said. "This is in a similar vein as to the belief that the European Central Bank is about to finally launch a bazooka to help the European Union banks address their €400 million rollover needs in the first quarter of 2012."

The good mood suffered a small blow at the end of the session, after news that Standard & Poor's could downgrade several European nations.

"Today's gains were stronger than Friday's right up until a late afternoon report stating that Germany and France might be stripped of their AAA credit ratings as the debt crisis prompts all 17 euro nations to be put on review for possible downgrade," a New York-based trader said. "That prompted some light selling into the close but still left the market up nicely for the day."

The Markit iTraxx SovX index was 15 basis points tighter on Monday.

"Emerging Europe, Middle East and Asia are clearly enjoying the ride," another trader said.

Against this backdrop, the TAQA deal came at a perfect time, he said.

"They're copying Qatar with generous pricing to ensure the deal is a success," he said. "We've seen great flow along the existing TAQA curve, which is now around 20 bps wider.

Elsewhere, though, activity was somewhat slow during the session.

"Activity is already showing some signs of the year-end lull, despite the positive tone," he said. "Retail investors are consistent buyers and it seems everyone is happy to let them move prices higher on low volume."

Petrobras prints bonds

In its new deal, Brazil's Petrobras International Finance priced a £700 million issue of 6¼% notes due Dec. 14, 2026 at 97.826 to yield 6.379%, or Gilts plus 370 bps, according to a filing with the Securities and Exchange Commission.

The notes were talked at Gilts plus 370 bps to 375 bps.

BB Securities, Bradesco BBI, Credit Agricole, Deutsche Bank, HSBC and Santander were the bookrunners for the SEC-registered deal.

This follows closely the heels of a €1.85 billion issue of notes due 2018 and 2022 via bookrunners Banco Bradesco BBI, Banco Santander, BB Securities, Credit Agricole, Deutsche Bank and HSBC.

The deal included €1.25 billion 4 7/8% notes due March 7, 2018 that priced at 99.021 to yield 5.066%, or mid-swaps plus 285 bps.

The second tranche totaled €600 million 5 7/8% notes due March 7, 2022 that priced at 99.266 to yield 5.977%, or mid-swaps plus 330 bps.

The new notes are guaranteed by Petroleo Brasileiro SA (Petrobras), an energy company based in Rio de Janeiro.

TAQA does deal

Also on Monday, Abu Dhabi-based energy company TAQA priced a $1.5 billion two-tranche issue of notes due 2017 and 2021 via bookrunners Bank of America Merrill Lynch, Mitsubishi UFJ Securities, RBS and Standard Chartered, a market source said.

The Rule 144A and Regulation S deal included $750 million 4 1/8% notes due Dec. 13, 2017 that priced at 99.502 to yield 4.233%, or Treasuries plus 330 bps. The notes were talked at Treasuries plus 335 bps, plus or minus 5 bps.

The deal also included $750 million 5 7/8% notes due Dec. 13, 2021 that priced at 99.515 to yield 5.94%, or Treasuries plus 390 bps. The notes were talked at Treasuries plus 400 bps, plus or minus 10 bps.

The notes include a change-of-control put if government ownership falls below 50%.

Middle East in focus

Looking at TAQA prior to pricing, some of the existing bonds sold off in response to revised price guidance on the new deal.

"As is becoming the norm these days, the secondary market adjusted to the talk on the new deals and bonds sold off. In saying that, late in the day prices did improve a little as guidance was revised in on the new deals," a trader said. "It was moderately busy on TAQA's secondary, especially the less-than-five-year deals. We're obviously expected an active morning on Tuesday as these deals should be free to trade."

Elsewhere in the Middle East, some small nibbling was seen for Qatar and Abu Dhabi-based International Petroleum Investment Co.'s curves.

"Heavy action was seen for Abu Dhabi Commercial Bank's sukuk," he said. "Bahrain remains a rock and we saw some decent bids around on Dubai names. Dubai Water and Electricity Authority, for example, is back above par and was last up at 101."

Some demand was seen for Abu Dhabi-based Mubadala Development Co. PJSC's 2014s. And Qatar-based Qtel International was active in its 2014s and 2020s with demand sighted.

"It's probably the belly of these next two weeks that's left of liquidity," he said. "It's already super-thin outside of solid and liquid names."

Turkey, Ukraine open firm

In other trading on Monday, Turkey opened firm and its sovereign bonds outperformed its corporates despite worse-than-expected consumer price index numbers, a London-based trader said.

"Even Ukraine is opening firm with good demand for state banks," he said.

Kazakhstan-based BTA Bank's 2018s were up at 32, despite stress on the company's balance sheet.

Russia's quasi-sovereign bonds maintained good momentum on Monday while corporate bonds were firmer at the open, with metals and mining names outperforming those in the oil and gas industry, another trader said.

Issuers plan roadshows

In deal-related news on Monday, Moscow-based rail operator OAO Russian Railways Co. was planning a roadshow in London to start Dec. 12, a market source said.

Royal Bank of Scotland and VTB Capital are arranging the investor meetings.

In November the company announced plans for a dollar-denominated bond offering of up to $1 billion in 2012.

And Colombia-based lender Banco de Bogota SA will set out on a roadshow on Tuesday for its planned issue of $1 billion 10-year notes, a market source said.

Citigroup, HSBC and JPMorgan are the bookrunners for the Rule 144A and Regulation S transaction, which will be marketed in London; Santiago, Chile; Boston; Lima, Peru; New York and Los Angeles. The marketing trip ends Dec. 8.

"There are still quite a few possible new issues before we close for Christmas," the London trader said.

Uruguay gives guidance

Also on Monday, the Republic of Uruguay set price talk for its planned issue of benchmark-sized notes due Dec. 15, 2028 at the 4 3/8% area, a market source said.

Citigroup and HSBC are the bookrunners for the SEC-registered deal.

The notes are part of a tender offer of bonds due 2018 for the new bonds, according to a filing with the SEC.

Proceeds from the new issue will be used to repurchase certain bonds in the tender offer and for general governmental purposes, including financial investment and the refinancing, repurchasing and retiring of domestic and external debt.

Pacific Rubiales sets size

And Toronto-based and Colombia-focused oil and gas exploration and production company Pacific Rubiales Energy Corp. set the size at $250 million and the tenor at 10 years for its planned issue of notes, a market source said.

Bank of America Merrill Lynch is the bookrunner for the Rule 144A and Regulation S notes, which are non-callable for five years.

Proceeds will be used for general corporate purposes.

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