Issuance slows before Fed meeting; Modern Land sells bonds; Transnet, Cementos Progreso ahead

By Christine Van Dusen

Atlanta, Oct. 28 - Modern Land (China) Co. Ltd. priced notes on a quieter Monday for emerging markets assets as U.S. Treasuries opened slightly weaker, prices remained mostly unchanged and only a few issuers took steps toward bringing new deals to the market.

"A particularly quiet start in Central and emerging Europe, the Middle East and Asia with London facing major transport disruption this morning," a London-based analyst said. "But most prices look relatively unchanged in spread terms."

Contributing to the quieter tone was a sense of calm ahead of the Federal Open Market Committee's meeting on Wednesday.

"Anything other than a decision to do nothing for the time being would be a major surprise given the recent weaker-than-expected economic data," according to a report from Erste Group Research. "The dip in activity is not restricted to the U.S., and the election outcome in the Czech Republic displays how difficult it will be to form economic policy in some [emerging markets] countries going forward."

All of this suggests that rates will likely stay lower for a longer period of time.

"That said, the dash for yield is probably best depicted in our region within Central and emerging European cash corporates," the report said.

Indeed, demand was strong on Monday for the new issue of €450 million 7½% notes due 2020 from Romania-based telecom RCS & RDS SA.

"Secondary prices were quoted at 102½ to 1031/2, substantially higher than the offering price of 100," the report said.

Pace of issuance slows

The primary market started the session much slower than any day in the previous week, the analyst said.

In addition to the Modern Land deal, just South Africa-based transportation company Transnet SOC Ltd. was seen planning a roadshow for a possible issue of Rule 144A and Regulation S notes and Guatemala's Cementos Progreso SA set initial price talk for a dollar deal.

"Very slow so far today," a trader said. "It's year-end for me, approaching on Oct. 31, and I'm just not motivated to ruffle the trading feathers of accounts so I can possibly get caught in bad positions to close out the year."

Modern Land sells notes

In its new deal, Beijing-based property developer Modern Land priced a $150 million issue of 13 7/8% notes due 2018 at 99.561 to yield 14%, a market source said.

Citigroup, Bank of China International, ICBC Asia and Morgan Stanley were the bookrunners for the Regulation S deal. Citigroup is the global coordinator.

The proceeds will be used to fund existing and new property projects, as well as for general corporate purposes.

Cement company sets talk

Guatemala City-based cement manufacturer and distributor Cementos Progreso SA set initial price talk in the mid- to high-7% area for an upcoming $300 million issue of 10-year notes (/BB/BB+), a market source said.

Deutsche Bank is leading the Rule 144A and Regulation S transaction.

A roadshow ended on Monday.

Pricing is expected to take place on Tuesday.

The issuer is a Guatemala City, Guatemala-based manufacturer and distributor of cement.

Middle East in focus

In trading, buyers were seen for Abu Dhabi Commercial Bank's 2023s, a trader said.

"Bahrain still has a decent bid, as do parts of Dubai," a trader said. "However, overall the market feels soggy, and there's further chatter of some more supply in the wings."

"There are a few bonds out there that trade very well and look like an OK value," a London-based trader said. "However, for every one of these bonds there are four to five others where there is paper around."

Sabic suffers

The "poor performance" of several bonds from the Gulf Region took a toll on investor sentiment, a trader said.

He pointed Saudi Arabia's Saudi Basic Industries Corp. (Sabic), which saw its 2018s move through Treasuries plus 150 bps after pricing last month at 130 bps, he said.

Meanwhile the Riyadh-based manufacturer of chemicals, fertilizers, plastics and metals announced plans to possible issue new bonds later this year.

Perpetuals attract interest

In other trading, perpetual notes from the Middle East received some attention, with Abu Dhabi Islamic Bank's notes spotted at 100¾ bid, 101¼ offered after pricing at par, a trader said.

Emirates Islamic Bank's perpetuals, which also priced at par, traded Monday at 91¼ bid, 91¾ offered.

"Great interest this morning," he said.

QNB 2016s perform

The recent issue of floating-rate notes from Qatar National Bank SAQ performed nicely in the secondary market on Monday morning, a London-based trader said.

The $750 million floating-rate notes due 2016 that priced at par were seen Monday at 100.70.

"Still doing nicely," he said.

The deal also included a $750 million tranche of 2¾% fixed-rate notes due 2018 priced at 99.459. That tranche, he said, hasn't performed as well as the floating-rate notes.

HSBC, Standard Chartered Bank, JPMorgan, RBS and Qatar National Bank were the bookrunners for the deal.

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