Middle Eastern issuers remain out of the issuance fray; Latvia, Romania tighten

By Christine Van Dusen

Atlanta, Jan. 17 - Issuers from the Middle East remained conspicuously on the sidelines on Friday as recent new issues from the emerging markets arena - from names like Latvia and Romania - tightened in trading.

"With U.S. Treasuries relatively stable, a strong primary market in Asia and Latin America, and EM grinding tighter, all expectations were for a flurry of new issues across [the Gulf region]," a London-based analyst said. "But anyone hoping for this will likely feel disappointed as the week comes to a close."

The lack of issuance, plus a tentative agreement between the United Arab Emirates and Iran, helped move spreads tighter on the week, a trader said. Emirates Islamic Bank led the way, with its 2023 narrowing by 35 basis points.

"We saw general demand for Bahrain and Kuwait names," a trader said.

When issuance does return from the Middle East, issuers from Dubai could be the first to come to the market, to finance upcoming maturities and to fund construction related Expo 2020.

"Next week we again wait for the inevitable floodgates to open," the analyst said. "This lack of issuance helped drive EM tighter in general, although activity this week was limited relative to previous weeks as investors await primary deals. The general impression is that investors are becoming increasingly hesitant about putting money to work with concerns that the rally witnessed in the last few weeks is running out of steam."

Bonds from Russia and its corporates, in particular, are becoming more expensive, she said.

Moscow bank stands out

The top performer from Russia on Friday was Credit Bank of Moscow, as its 2018s tightened 71 bps on the week, a trader said.

"The name continues to rebound from the sell-off seen in December," she said. "Russian Agricultural Bank was a top performer, with the 2017s 29 bps tighter, while Gazprombank also enjoyed a strong week."

The latter's perpetuals were 35 bps tighter and the 2019s were 26 bps tighter, she said.

Vnesheconombank underperformed, she said.

Latvia narrows

The new notes from Latvia - €1 billion 2 5/8% notes due 2021 that priced at 98.808 to yield 2.815% - have tightened about 15 bps since issuance, a trader said.

Citigroup, JPMorgan and Societe Generale were the bookrunners for the Rule 144A and Regulation S deal.

Romania strengthens

Romania's new two-tranche issue of $2 billion notes due 2024 and 2044 performed well in trading at the end of the week, a market source said.

The deal included $1 billion 4 7/8% notes due 2024 that priced at 98.863 to yield 5.021%, or Treasuries plus 215 bps. The notes were talked at a spread in the 220 bps area.

The second tranche totaled $2 billion 6 1/8% notes due 2044 that priced at 98.209 to yield 6.258%, or Treasuries plus 245 bps. The notes were talked at a spread in the Treasuries plus 250 bps area.

BNP Paribas, Citigroup and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

"The 2044s have performed particularly well, trading at 101," the trader said.

Turkey tightens

Five-year bonds from Turkey ended the week about 20 bps tighter, even as the political situation there remained tense.

"Longer-dated paper underperformed," a source said, noting that Turkey's 2043s were 8 bps tighter.

"Turkish banks ended the week flat," she said. "Finansbank once again was one of the top performers, with the 2017s 9 bps tighter."

Meanwhile, Bank Asya was under pressure, with the 2023s about 16 bps wider.

"Investors continue to react to the local press article stating that the bank was seeing deposit outflows," she said. "Turkish corporates had a solid week."

Yuzhou gives guidance

China's Yuzhou Properties Co. Ltd. set final talk at 8 5/8% for its planned issue of dollar-denominated notes due in five years (expected ratings: B2/B/), a market source said.

BOCI Asia Ltd., Citigroup Global Markets Inc., Deutsche Bank AG, Singapore Branch and Hongkong and Shanghai Banking Corp. are the bookrunners and lead managers.

The proceeds of the Regulation S deal will be used to repay some debt, to fund the acquisition of land for residential and commercial property development and for general corporate purposes.

Yuzhou is a property developer based in Hong Kong.

Gazprombank sells notes

On Thursday, Russia's Gazprombank OJSC priced CHF 325 million 5 1/8% notes due 2024 at par to yield 5 1/8%, or mid-swaps plus 441.8 bps, a market source said.

The notes were talked at 5¼% to 5½%.

Credit Suisse, Gazprombank and UBS were the bookrunners for the deal.

The issuer is a Moscow-based lender.

Banco Regional prints bonds

Also on Thursday, Paraguay's Banco Regional SAECA priced $300 million 8 1/8% notes due 2019 at 99.496 to yield 8 ¼%, a market source said.

Talk was set in the mid-to-high-8% area.

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

The proceeds will be used for general corporate purposes.

The lender is based in Encarnacion, Paraguay.

China South City taps banks

China South City Holdings Ltd. has mandated UBS, Citigroup, HSBC, BofA Merrill Lynch, Credit Suisse and ICBC International as bookrunners for an upcoming issue of dollar-denominated notes, a market source said.

UBS, Citigroup and HSBC will also serve as joint global coordinators for the Regulation S deal.

Based in Hong Kong, China South City develops and operates large-scale, integrated logistics and trade centers in China.

Slovenia picks bookrunners

Slovenia has mandated Barclays, Goldman Sachs and JPMorgan as bookrunners for a possible benchmark-sized issue of dollar-denominated notes that will be marketed during a roadshow, a market source said.

The roadshow will begin on Tuesday.

A Rule 144A and Regulation S deal may follow.

Roadshow for Hong Kong issuer

Hong Kong and China Gas Co. Ltd. has mandated HSBC, JPMorgan and Morgan Stanley to lead a roadshow for a dollar-denominated issue of notes, a market source said.

A Regulation S deal may follow.

No other details were immediately available on Friday.

Metro de Santiago plans notes

Chile's Empresa de Transporte de Pasajeros Metro SA (Metro de Santiago) is looking to issue up to $500 million notes due in 2024, according to a report from Fitch Ratings.

The proceeds will be used to fund capital expenditures and for general corporate purposes.

The company is Chile's state-owned mass transport firm, which manages Santiago's rapid transit system.

Braskem deal oversubscribed

The final book for Brazil-based petrochemical company Braskem's new $500 million issue of 6.45% notes due 2024 was about $5.5 billion, a market source said.

The notes priced at par to yield 6.45%, or Treasuries plus 360.70 bps, following talk in the high-6% area.

Bradesco BBI, Citigroup, Credit Agricole-CIB, Deutsche Bank and HSBC were the bookrunners for the Securities and Exchange Commission-registered deal.

Standard Chartered Bank was the co-manager.

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