Hang Lung unit, Korea Exchange Bank price notes as gleam from Greek elections wears off

By Christine Van Dusen and Aleesia Forni

Atlanta, June 18 - Though the elections in Greece proved positive for the sovereign's pro-bailout party and resulted in a brief rally on Monday, emerging markets assets had a mostly quiet day, with activity limited to names like Petroleo Brasileiro SA (Petrobras), Santander Brazil, Sberbank, Russia and KazMunaiGas.

"While the [election] results reduce the likelihood of a near-term Greek exit from the euro and increase the chances of successful negotiations with the 'troika,' an initial relief rally in risky assets quickly petered out," according to a report from Barclays Capital Markets.

Still, some issuers moved forward with deals, including Hong Kong-based HPL Finance Ltd. and Korea Exchange Bank.

"The market is painfully quiet," a New York-based trader said. "Latin American corporates opened in a mode as quiet as it could possibly be, with super low Street activity and limited customer inquiry."

The Markit iTraxx SovX index spread opened unchanged on Monday.

"That's leaving cash bonds to outperform, typically 5 basis points to 10 bps firmer, with the outperformers being the usual squeeze bonds: Sberbank's 2022s, Russia's 2022s and KazMunaiGas' 2021s," a London-based trader said.

By the afternoon, spreads widened a few bps, the New York trader said.

"Many realize they now must, and will, wait for the upcoming trifecta of the G-20 Mexico meetings, the Federal Open Market Committee statements and the European Union summit in 10 days to look for clearer vision in addressing all the current crisis issues."

That kept activity and volumes muted, he said.

"Overall underlying volatility still very much exists," he said.

Said another trader, "With Greece old news and Spain seemingly not a concern for EM investors, what to focus on next? Spare a thought for the G-20 ministers toughing it in Los Cabos. Given that monetary stimulus seems to come without a cost, expect more of it."

Southern Copper tightens

In trading, Phoenix-based Southern Copper Corp. - which focuses on copper mining, smelting, refining and exploration in Peru, Mexico, Argentina, Chile and Ecuador - tightened a bit on Monday.

"They're at the plus-352 bps area, after gapping as wide as plus-375 bps a month ago," the New York trader said. "But volumes and liquidity remain poor, particularly on the higher-duration paper."

Embraer notes doing OK

The new notes from Brazilian aircraft producer Embraer SA were performing fairly well on Monday.

The $500 million issue of 5.15% notes due 2022 came to the market on Tuesday at par to yield Treasuries plus 248.6 bps.

"They still have a good bid, about 10 bps tighter than new issue," he said.

Citigroup, Itau Unibanco and Morgan Stanley were the bookrunners for the Securities and Exchange Commission-registered notes.

Proceeds will be used for general corporate purposes, including working capital needs.

Ukraine falls behind

In other trading on Monday, Ukraine lagged, the London-based trader said. The sovereign's 2021 notes were trading at 89.50 bid, 90.25 offered.

"They're 5 bps wider, now that the euro periphery is being smoked, as it seems the market has moved beyond Greece," he said. "There's limited interest, aside from buying in mining names."

Some names from the Middle East and North Africa saw some decent buying, he said. But emerging Europe was "choosing to sit this one out," he said.

"Dubai is performing the best, with the 2022 dollar sukuk at z-spread plus 425 bps, or 40 bps tighter on the month," he said. "And interestingly we've seen small interest in some of the off-the-run names, like Turkey's Yasar Insaat. But nothing to move the market."

HPL Finance prints notes

In its new deal, HPL Finance priced a $500 million 4¾% 10-year senior unsecured bond at 98.546 to yield 4.936%, or Treasuries plus 335 bps, according to a syndicate source.

The deal priced tighter than talk, which was set in the area of 360 bps over Treasuries.

The bond is guaranteed by Hang Lung Properties Ltd., a Hong Kong-based real estate company.

HSBC, Goldman Sachs, Bank of America and Morgan Stanley are bookrunners on the Regulation S deal.

The final book was more than $2 billion.

Korea Exchange Bank prices

Seoul-based Korea Exchange Bank priced a $700 million issue of 3 1/8% notes due 2017 at 99.455 to yield 3.244%, or Treasuries plus 255 bps, a market source said.

Bank of America, HSBC, ING, KEB Asia Finance, Citigroup and Morgan Stanley were bookrunners for the Rule 144A and Regulation S deal.

Bahrain plans roadshow

Bahrain will begin a roadshow on June 20 ahead of a planned issue of $1.25 billion bonds, according to a market source.

In May, Bahrain mandated Standard Chartered, JPMorgan, Gulf International Bank and Citigroup as bookrunners.

The deal is expected to carry a tenor of between seven and 10 years.

"Bahrain is on the road, which is keeping their curve pegged back," a London-based trader said.

Saudi bank talks notes

Jeddah, Saudi Arabia-based lender Islamic Development Bank set price talk at the Libor plus 40 bps area for a planned five-year issue of dollar-denominated and benchmark-sized sukuk notes, a market source said.

Barwa Bank, BNP Paribas, CIMB, HSBC, NCB Capital and Standard Chartered are the bookrunners for the deal.

"It's interesting," a trader said. "I'm hearing Libor plus 40 bps area, which is amazing, given that aside from new issues you can't give this paper away. It's 50 bps wider and yet it always performs into a new deal."

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