Transnet prices while most issuers, investors await stability in Egypt; Bahrain eyes notes

By Christine Van Dusen

Atlanta, Feb. 3 - The bitter clashes in Egypt - as well as fears that the instability will spread to more countries in the Middle East - remained top of mind for emerging markets investors and issuers on Thursday, thinning volumes and plugging up the clogged pipeline of planned deals.

Only South African transportation company Transnet Ltd. issued notes.

"The themes occupying the markets remained the same, with geopolitical, sovereign and economic issues all making a clear spread direction hard to find," said Gavan Nolan, an analyst with Markit, in a report.

Even a pair of positive economic reports from the United States - showing that jobless claims dropped last week and the services sector grew more than expected in January - did little to raise spirits.

"Egypt and the Middle East region are 99% of everything at the moment," a London-based market source said. "There's definitely more of a sit back and digest tone, so the volumes are not as heavy as we've seen."

Despite this, the market still wasn't tanking. "It's treading water, basically," he said.

The JPMorgan Emerging Markets Bond Index Plus spread managed to close 3 basis points tighter, with Venezuela down 13 bps.

Egypt's bonds stable

Even as the violent chaos continued in Egypt, the sovereign's bonds were fairly stable on Thursday, a London-based trader said.

Egypt's 2020 dollar notes were seen trading at 94.5 bid, 95.5 offered after trading on Wednesday at 95 bid, 96.5 offered.

Decent performance was also noted for Abu Dhabi-based Tourism Development Investment Co. and Abu Dhabi National Energy Co., while the recent 8½% sukuk notes due 2016 that priced Jan. 26 at par from Dubai's Emaar Properties were seen trading Thursday at 98.5.

Jordan's 3 7/8% notes due 2015 - which traded Wednesday at 92 bid, 93 offered - opened Thursday at 91.5 bid, 92.5 offered.

"There's much more activity than normal in credit default swaps, which tells me more desks are trying to macro hedge and pick the next shoe to fall," the trader said.

Transnet sells notes

South Africa-based rail, port and pipeline company Transnet sold $750 million 4½% notes due Feb. 10, 2016 at 99.443 to yield 4.626% via Barclays Capital and Goldman Sachs in a Rule 144A and Regulation S deal

The notes include a put at par if the government ceases to own more than 50% of the company.

"I can only speculate on why they would do a deal right now," a market source said. "Maybe they don't think that they're going to pay a premium because of what's happening in the Middle East. Or maybe they're comfortable with the premium they're going to pay. Or maybe they need the money so it doesn't matter what the premium is.

"It's a highly rated company, so perhaps the spread differential is negligible and they've been advised to get it done."

Banco BVA does deal

This followed Wednesday's pricing of a tiny deal from Brazil-based lender Banco BVA SA, which brought to market $45 million 9 1/8% notes due Feb. 7, 2014 at 99.361 to yield 9 3/8%.

BCP Securities and UBS were the bookrunners for the Regulation S-only deal, which was talked at a yield in the low 9% area.

Proceeds will be used for credit portfolio growth and for general corporate purposes.

Most other issuers are waiting for the Middle Eastern situation to settle down before bringing deals to market, the London-based source said.

"I think that situation is just treading water as well," he said. "They're just looking for a slightly better window, perhaps."

Bahrain mulls bond offering

Meanwhile, the Kingdom of Bahrain was considering an issue of $1 billion of bonds that could come to market as soon as next month, a market source said.

But the idea wasn't exactly well received on Thursday.

"There's no love for Bahrain in the market," the London-based trader said. "There are reports of protests planned in Bahrain by opposition groups. This plus the fact that Bahrain is reported to have sent [requests for proposals] to banks for a new deal in March has seen 'Bahrain Inc.' trade heavy."

The sovereign's 5½% 2020 notes, which traded at par on Wednesday, were seen at 98.25 bid, 99 offered on Thursday.

"They're freely offered at 99 in the street today," the trader said.

Said Nolan: "Bahrain was again the worst performer in the region."

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