Gulf Investment, PLN sell notes as solid market pushes EM bonds 'higher and tighter'

By Christine Van Dusen

Atlanta, Oct. 16 - Kuwait's Gulf Investment Corp. and Indonesia's Perusahaan Listrik Negara (PLN) were among the issuers to bring new deals to the market on Tuesday amid strong demand for emerging markets assets.

Case in point, the new $500 million issue of 1 7/8% notes due 2017 from Korea Expressway Corp. drew about $3.25 billion of orders from about 200 accounts.

"That's what we got today," a London-based trader said. "The simple equation of supply and demand, coupled with very solid broader markets."

Most emerging markets bonds, particularly those from the Gulf Region, were higher and tighter on Tuesday, he added.

Paper from International Petroleum Investment Co. hit new highs, he said, and bonds from corporate issuers in Dubai were popular.

"With Jebel Ali Free Zone at 109.50 bid, Emaar Properties' 2019s at 108.125 bid and Majid al Futtaim's 2019s trading with a 105 handle, it's pretty clear that Dubai names are still in decent demand," he said. "[Dubai Electricity and Water Authority]'s 2020s traded in small size with a 118 handle."

Also, a good amount of DPWorld's paper due 2037 went through at 109 on Tuesday.

Bahrain's 2020s and 2022s also traded well, and bonds from South Africa and Ukraine were solid performers.

In deal-related news, two Russian issuers and two Turkish issuers - VTB Bank and Brunswick Rail Ltd., and Tupras and Turkiye Vakiflar Bankasi TAO (Vakifbank) - took steps toward bringing new deals to the market.

And the new notes from Singapore-based food processing company Olam International Ltd. attracted a solid order book, a New York-based market source said.

Korea Expressway sells notes

In its new deal, Korea Expressway priced $500 million of 1 7/8% notes due Oct. 22, 2017 at 99.597 to yield Treasuries plus 130 basis points in a Rule 144A and Regulation S deal.

Bank of America Merrill Lynch, Deutsche Bank, JPMorgan and RBS were the bookrunners.

About 64% of the orders came from Asia, 20% from Europe and 16% from the United States.

Funds picked up 64%, banks 22%, the public sector 8% and retail investors 6%.

PLN sells notes

Indonesian electric company PLN sold $1 billion 5¼% notes due Oct. 24, 2042 at 98.514 to yield 5.35% after being talked at a yield in the 5.4% area.

Barclays and Citigroup were the bookrunners for the Rule 144A and Regulation S deal.

Gulf Investment prints bonds

Financial services company Gulf Investment printed a CHF 285 million issue of 2¾% notes due Nov. 16, 2015 at 99.702 to yield 2.855%, or mid-swaps plus 275 bps, in line with talk.

BNP Paribas and RBS were the bookrunners for the deal.

New Akbank bonds rally

The new $500 million notes from Turkey's AkBank TAS saw demand in the secondary market on Tuesday, a trader said.

On Monday the lender priced a combined $1 billion of five- and 10-year notes, including $500 million 3 7/8% notes due 2017 that priced at 99.672 to yield 3.948%, or Treasuries plus 328.1 bps.

The second tranche - $500 million 5% notes due 2022 - priced at 99.001 to yield 5.129%, or Treasuries plus 345.2 bps.

Bank of America Merrill Lynch, Citigroup, HSBC, JPMorgan and Societe Generale were the bookrunners for the Rule 144A and Regulation S deal.

"They announced, launched and rallied 3 points in basically 24 hours," a trader said.

Qatar banks in demand

In other trading on Tuesday, investors showed some interest in the recent bonds from Qatar Islamic Bank and Qatar International Islamic Bank, a trader said.

"Although there is still paper around," he said. "Very defensive names. They will not take off 1 to 2 points to the upside. But on the flip-side, they will struggle to drop to 99 in any sell-off."

The notes from Qatar International Islamic Bank, which recently priced at par, closed Tuesday at 100.20 bid, 100.35 offered.

Supply limited for Ukraine

The secondary market also saw strong performance - and limited supply - from Ukraine's bonds, said Svitlana Rusakova of Dragon Capital.

Ukraine's 2017s traded up at 107.375 before settling in at about 106.75 bid, 107.75 offered. The sovereign's 2020s were seen at 101.50 bid, 102.50 offered and its 2021s gained too, to 102.50 bid, 103.50 offered.

"Corporates started to catch up with sovereigns and were well bid overall," she said. "Oschadbank traded up to 94.75 bid, 96.25 offered."

Ukreximbank's 2015s were spotted at 97 bid, 98.50 offered.

"[First Ukrainian International Bank] continued to enjoy retail buying support with offers being lifted above par," she said.

Latin America in focus

Looking to Latin American bonds, performance was mixed on Tuesday, a New York-based trader said.

Many higher-rated credits were tighter by as much as 2 bps while notes from Venezuela and PDVSA were mostly unchanged.

Bonds from Argentina were underperformers during the session, with prices dropping.

The trader also noted some better buying of Latin American debt.

Turkish corporates plan deals

Turkish petrochemical company Tupras plans to issue up to $1 billion of notes due in five to seven years via Citigroup and Deutsche Bank.

And Turkey's Vakifbank has mandated Barclays, Goldman Sachs, ING and Standard Chartered as bookrunners for an issue of dollar notes, a market source said.

The Rule 144A and Regulation S deal will be marketed on a roadshow starting Thursday.

The marketing trip will begin in London and visit Zurich, Geneva and Boston before wrapping up on Oct. 23 in New York.

VTB sets talk

Russia's VTB Bank set talk at the 4½% area for a planned issue of renminbi-denominated bonds due in October of 2015, a market source said.

BNP Paribas and VTB Capital are the bookrunners for the Regulation S deal, which is expected to be benchmark-sized.

Proceeds will be used for general corporate purposes.

And Russian railcar operating lessor Brunswick Rail has mandated Goldman Sachs, Raiffeisen Bank, UBS and VTB Capital for a possible dollar-denominated issue that will be marketed during a roadshow, a market source said.

The marketing trip for the Rule 144A and Regulation S deal will begin Oct. 17 in London and travel to Geneva, Zurich, Los Angeles and Boston before concluding on Oct. 24 in New York.

Olam deal oversubscribed

The final book for Olam International's S$400 million issue of 6% senior notes due Oct. 25, 2022 was S$1.5 billion from 78 accounts, a market source said.

The notes priced at par via Standard Chartered in a Regulation S deal.

About 77% of the orders came from Singapore. Private banks took up 70%, funds 23%, banks 6% insurers and others 1%.

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