Russia’s O1 prices notes; Turkey sees selloff; eyes on oil; Pakistan, EuroChem prep deals

By Christine Van Dusen

Atlanta, Sept. 26 – Russia’s O1 Properties Finance plc priced new notes on Monday as investors sold off bonds from Turkey, following the sovereign’s downgrade by Moody’s Investors Service to Ba1.

“While we think that many investors remained underweight ahead of the decision, some were certainly caught off-guard, given recent comments by Moody’s saying that the recent shock from the coup attempt had largely dissipated,” a London-based analyst said.

Spreads started off Monday’s session wider, with five-year credit default swaps spreads moving out 25 basis points to 270 bps, but “we see a more pronounced widening as likely to be temporary,” he said.

Indeed, as the morning went on, CDS moved back to 264 bps while sovereign cash was 25 bps wider, he said.

“Corporates and banks are underperforming by 40 bps to 45 bps, in line with our expectations, as we have seen those trading already tight to the sovereign, in addition to stronger liquidity in the sovereign curve,” he said.

The sell-off has certainly been less dramatic than the one seen after the coup attempt, a trader said.

“The ferocity of the selling so far has been a trickle in comparison to what we saw on the Monday, post-coup attempt,” he said.

Said the analyst, “We expect forced selling to be relatively smooth as those investors have likely started to sell already in the review, while further selling will take place over the weeks ahead, rather than suddenly.”

Oil meeting ahead

Also on Monday, investors were keeping an eye on the oil markets.

“It’s an important week for oil markets, with OPEC producers holding an informal meeting on Sept. 28 at the sidelines of the International Energy Forum in Algeria,” the analyst said. “The outlook for an output freeze deal this week has slimmed after Saudi Arabia’s comments from Friday, saying that the meeting would rather be a ‘consultation.’ Markets therefore remain skeptical, despite comments from Algeria’s Energy Minister yesterday that all options remain on the table.”

Lat-Am weakens

Some Latin American bonds experienced “considerable weakness” in trading on Monday, a New York-based trader said, which was particularly surprising for Mexican banks, “given their usual resilience during weak market stretches.”

Mexico-based Cemex SAB de CV gave up its three-point gain while high-grade names from Chile were mostly quiet, he said.

“Peru banks continue to get pulled to the left, which also started on Friday’s open,” he said.

‘Patchy day’ for Middle East

In trading, it was a “patchy day, with pockets of activity” for many Middle Eastern names, a London-based trader said.

Qatar’s 2046 dollar notes were wider by 5 bps, spotted at 109.85, while Bahrain’s 2044 dollar notes were down one point to and its 2026s were well offered.

“Long-end Saudi Electricity Co. has gone back to being offered, despite the rate move,” he said. “Perpetuals are a mixed bag again.”

Oman’s 2021 and 2026 bonds moved “a touch wider” to be 10 bps wider on the week, he said.

“The Dubai curve is 10 bps wider,” he said.

Russia’s O1 prices notes

In its new deal, Russia’s O1 Properties priced $350 million 8¼% notes due 2021 at 98.999, according to a filing from the company.

Credit Suisse, Goldman Sachs, JPMorgan, Raiffesein Bank and VTB were the bookrunners for the Rule 144A and Regulation S deal.

Otkritie Bank was the co-manager.

The investment company is based in Moscow.

Pakistan sets roadshow

Pakistan will set out next week for a roadshow to market a $750 million-minimum issue of Islamic bonds, a market source said.

Citigroup, Deutsche Bank, Standard Chartered, Noor Bank and Dubai Islamic Bank are the bookrunners for the deal.

The sovereign previously announced plans for up to $1 billion of notes.

EuroChem plans new notes

Russia’s EuroChem Global Investments Ltd. is planning to issue new loan participation notes in a Rule 144A and Regulation S deal, alongside a tender offer, according to a company announcement.

The company is conducting a tender offer for its outstanding $750 million 5 1/8% notes due in 2017.

Citigroup Global Markets Limited, Goldman Sachs International, HSBC Bank, ING Bank, JPMorgan Securities, Sberbank CIB and SIB (Cyprus) are the joint dealer managers for the offer.

The fertilizer company is based in Moscow.

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