FlyDubai sells notes; Russia, Ukraine conflict goes on; BBVA news boosts GarantiBank bonds

By Christine Van Dusen

Atlanta, Nov. 19 – Dubai Aviation Corp. (FlyDubai) printed new notes on Wednesday as investors focused on news from Russia, Ukraine, Brazil’s Petroleo Brasileiro SA (Petrobras), Peru’s BBVA Banco Continental SA and Turkey-based GarantiBank International NV (GarantiBank).

BBVA is seeking to increase its ownership of GarantiBank from 14.9% to 39.9% by purchasing shares from Turkish holding company Dogus Holding AS, a London-based analyst said. This would not necessitate the launching of a tender offer, according to BBVA.

“A possibility of an increase in ownership has always been discussed, but the size of the stake being discussed is a surprise,” he said.

The news was positive for GarantiBank’s bonds on Wednesday; the notes tightened by 7 basis points to 9 bps on Wednesday morning.

“However, it is too early to get excited about a possible full takeover,” he said. “On the face of it, it appears BBVA is also deliberately buying a stake that does not force a full take-over. Although positive for Garanti, we think spread tightening will be limited.”

Also on Wednesday, bonds from Russia were weaker as a result of the ongoing tensions with Ukraine, he said.

“There were some relatively conciliatory remarks out of Moscow yesterday, however, with Russian and German leaders agreeing to work further on a disengagement program,” he said.

So far this week, the 2015 and 2017 bonds from Ukraine have seen balanced flows, said Svitlana Rusakova of Dragon Capital.

But the long end of the curve is “still heavy,” she said, and pushed the curve slightly lower overall.

Quasi-sovereign issuer State Export-Import Bank of Ukraine (Ukreximbank) saw its 2015 outperform, moving up a ½ point.

“Corporates were generally still offered and illiquid,” she said.

Uralkali in focus

In other news from the region, Russian-based potash producer Uralkali suspended work on one of its mines after a sinkhole was found.

This sent shares lower but had little impact on the company’s 3.723% eurobond due in 2018, which last year priced at par to yield mid-swaps plus 285 bps.

“A cut in production could help potash prices generally, and potentially help other fertilizer companies,” the analyst said.

Petrobras 2019s struggle

Bonds from Brazil-based Petrobras had a slow start on Wednesday, with short-dated bonds tightening a few basis points, a New York-based trader said.

Selling continued, though not by as many investors as on Tuesday, in the aftermath of the company’s corruption scandal.

The company’s 2019 bonds struggled, he said, as did many other Brazilian corporates, which were hit with the contagion.

Middle Eastern flows subdued

Most bonds from the Middle East were, for the most part, a “mixed bag” on Wednesday, a London-based trader said.

“Qatar remains heavy, especially the belly, and it’s not helped by seasonality factors,” he said. “A lot of big funds are closed for the year.”

Flows were subdued during much of the session, he said.

“I guess the focus was on new issues,” he said.

Mumtalakat trades up

The new issue of notes from Bahrain Mumtalakat Holding Co. BSC – $600 million 4% Islamic bonds due 2021 that came to the market at 99.043 – was trading well on Wednesday morning, a trader said.

The notes were up almost a point, he said.

The deal came to the market at a spread of mid-swaps plus 205 bps with bookrunners BNP Paribas, Deutsche Bank, Mitsubishi UFG and Standard Chartered Bank in a Regulation S deal.

“An impressive return,” he said. “The bond is closing today at 99 7/8 bid, 100 1/8 offered, up a shade under one point.”

FlyDubai sells notes

In its new deal, FlyDubai sold $500 million 3.776% notes due Nov. 26, 2019 at par to yield 3.776%, or mid-swaps plus 200 bps, a market source said.

The notes priced tighter than talk, set first in the 225 bps area and then revised to 212.5 bps.

Credit Agricole CIB, Dubai Islamic Bank, Emirates NBD, HSBC, National Bank of Abu Dhabi, Noor Bank and Standard Chartered Bank were the bookrunners for the Regulation S sukuk issue.

The issuer is a low-cost airline.

“Priced at par and trading about there, give or take 5 cents,” a trader said. “Expect some local support tomorrow morning, on this one.”

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