Mega Advance Investments, MIE Holdings print notes amid solid buying; sukuks see demand

By Christine Van Dusen

Atlanta, May 5 - Emerging markets assets managed to remain firm on Thursday even as risk appetite took a bit of a hit on the news that jobless claims in the United States unexpectedly rose, leading to increased concerns about the global economic recovery.

"If you had been thinking about taking risk off, there have been plenty of triggers in the last 24 hours," a London-based market source said. "Yet EM, for now, remains firm."

And several issuers brought new deals to the market - including China's Mega Advance Investments Ltd. and China's MIE Holdings Corp. - while a handful of others took steps toward issuance.

In trading, activity was seen across the Middle East and Africa.

"While broader markets are showing some jitters, the Middle East and Africa I must admit again impressed with better buying seen across the board," a London-based trader said. "Flow-wise, it's been pretty active."

The JPMorgan Emerging Markets Bond Index Plus widened 4 basis points to Treasuries plus 283 bps, with Argentina wider by 20 bps and Venezuela by 22 bps.

Finansbank in focus

The deal that most market-watchers were waiting for was the issue of up to $750 million five-year notes from Turkey-based lender Finansbank AS, which were talked at the mid-swaps plus 350 bps to 362.5 bps area, a market source said.

Citigroup, Deutsche Bank, HSBC and Standard Chartered are the bookrunners for the deal.

"We think its strong stand-alone credit metrics should make this a sufficient pick-up for investors who are comfortable with its funding and operational independence from (parent company) National Bank of Greece," a trader said.

Said another market source: "This is showing how people can see the good in life, and ignore the parent trading 600 bps wider."

In other trading from Turkey, the sovereign bonds open slightly softer while banks performed. Traders reported better selling of Turkiye Garanti Bankasi AS' 2021 notes, which priced April 14 at 98.086. On Thursday the notes were seen at 99.30 bid, 99.65 offered.

Senegal on radar screens

Traders were also on the lookout for the new issue of benchmark-sized notes from Senegal due 2021 via Standard Bank and Standard Chartered Bank in a Rule 144A and Regulation S deal.

The notes, which were expected to price as soon as late Thursday, had been talked at the low- to mid-9% area.

"This is receiving great interest," a market source said. "Prints were reported up 1 point in the gray market."

Market-watchers were also whispering about Rwanda, suggesting the sovereign could soon issue notes.

"We also managed to trade some Morocco 2017s within the 99.37 bid, 99.75 [offered] context," he said. "We also saw some reasonable bids on Ghana and Gabon. And the front end of Tunisia has had a bit of interest."

Mega Advance does deal

In its new deal, China's Mega Advance Investments priced a two-tranche issue of $1 billion notes due 2021 and 2041, a market source said.

The notes - guaranteed by Hong Kong-based conglomerate Beijing Enterprises Holdings Ltd. - included $600 million 5% notes due May 12, 2021 that priced at 98.985 to yield 5.131%, or Treasuries plus 195 bps. The notes priced in line with talk, which was set at the Treasuries plus 200 bps area.

The second tranche totaled $400 million 6 3/8% notes due May 12, 2041, which came to the market at 99.589 to yield 6.406%, or Treasuries plus 210 bps. The notes priced at the tighter end of talk, which was set at Treasuries plus 200 bps to 225 bps.

Bank of America Merrill Lynch, HSBC, Morgan Stanley, Credit Suisse and UBS were the bookrunners for the Rule 144A and Regulation S notes.

MIE Holdings sells bonds

In another new deal, China-based oil company MIE Holdings sold $400 million notes due May 12, 2016 at par to yield 9¾%, a market source said.

The notes priced in line with talk, which was set at the high 9% area.

Bank of America Merrill Lynch and Deutsche Bank were the bookrunners for the Rule 144A and Regulation S notes.

The notes are non-callable for three years.

And in other news from China, business conglomerate Fosun International Ltd. launched its planned issue of $300 million notes due 2016 at 7½%, a market source said.

Goldman Sachs, Standard Chartered Bank and UBS are the bookrunners for the Rule 144A and Regulation S transaction.

Proceeds will be used for general corporate purposes, to repay existing debt and to repay a bridge loan from Standard Chartered Bank.

Hong Leong issues notes

All of this news followed the Wednesday pricing of Malaysia-based lender Hong Leong Bank's RMB 1 billion subordinated notes due 2021 with a coupon of 4.35%, according to a company announcement.

CIMB Investment Bank Bhd. and Hong Leong Investment Bank Bhd. were the bookrunners for the notes, which are callable at the end of year five.

Also pricing Wednesday was Banco Santander Brasil SA's CHF 150 million 3 1/8% notes due Dec. 1, 2014, which came to the market at 100.018 to yield 3.123%, or mid-swaps plus 180 bps, a market source said.

Credit Suisse and RBS were the bookrunners for the deal.

Sukuks going strong

Looking at the Middle East, sukuk issues continued to see strong demand, with Dubai and Dubai Water and Electricity Authority staying firm, a trader said.

Better selling was seen for Abu Dhabi-based investment vehicle Mubadala Development Co. PJSC's 2021 notes, which priced at 99.484 on April 13. On Thursday the notes traded at 101.37 bid, 101.62 offered.

"This region impressed me with better buying seen across the board," the London trader said. "Bank names are very well supported. Offer side liquidity remains thin."

He also noted better buying for Bahrain and Abu Dhabi National Energy Co.

Kazkommertsbank ahead

One trader was keeping an eye on the upcoming offering of dollar notes due 2018 from Kazakhstan-based lender JSC Kazkommertsbank (KKB) via JPMorgan and UBS in a Rule 144A and Regulation S deal.

The notes were whispered at the 8 5/8% area.

"The whole KKB curve has rallied substantially recently. Hence we do not perceive outstanding bonds as compelling," she said. "At the current guidance the proposed bond will price flat to the curve, so we believe it does not provide sufficient premium for its risks."

Hungary performs

Among recent new issues, the new €1 billion issue of 6% notes due 2019 from the Republic of Hungary - which priced Wednesday at 99.365 to yield mid-swaps plus 270 bps - was a solid performer on Thursday.

"The new Hungary deal was very well executed, trading up about a half-point but without the usual massive flipping frenzy," the London-based market source said.

Near the end of the European session, the new notes were trading at 99.75 bid, 100 offered.

Cyfrowy Polsat sets talk

Also on Thursday, Poland-based pay-television company Cyfrowy Polsat Finance AB set price guidance for its planned €350 million offering of notes due 2018 at the 7¼% area, a market source said.

Credit Agricole, Citigroup and RBS are the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used to refinance debt.

Also from Poland, Bank Ochrony Srodowiska SA (Bos Bank) set the tenor at five years for its planned issue of euro-denominated senior notes, a market source said.

Barclays Capital, ING and Riaffeisen Bank International are the bookrunners for the Regulation S deal, which is expected to launch soon.

Banco Fibria gives guidance

Thursday also saw Brazil-based lender Banco Fibria SA set price guidance for its planned dollar-denominated issue of three-year notes at 6%, a market source said.

Banco Safra is the bookrunner for the Regulation S deal, which is expected to price this week.

Also setting guidance on Thursday was China-based ENN Energy Holdings Ltd. The gas investment and distribution company talked its planned issue of dollar-denominated senior notes due 2021 at the Treasuries plus 300 bps area, a market source said.

Citigroup, BOC International, Barclays Capital and RBS are the bookrunners for the Rule 144A and Regulation S deal.

The notes include a change-of-control put at 101%.

Proceeds will be used for general corporate purposes, to finance capital expenditures, to refinance the company's 2012 notes, to pay off certain short-term loans and for business expansion acquisition of new projects.

FirstRand names more leads

Also on Thursday, South Africa-based lender FirstRand Bank Ltd. named FirstRand Bank, JPMorgan, Standard Chartered Bank and UBS as additional leads for a roadshow from May 9 to May 11, a market source.

The company had previously named Mitsubishi UFJ Securities as one of its bookrunners.

And in other news, the final book for India-based commercial lender Syndicate Bank's $500 million issue of 4¾% notes due 2016 was $2.5 billion with more than 200 accounts involved, a source said.

The notes priced on Tuesday at 99.771 to yield 4.802%, or Treasuries plus 285 bps.

Bank of America Merrill Lynch, Citigroup, Deutsche Bank, HSBC, JPMorgan, RBS and Standard Chartered were the bookrunners for the Regulation S-registered deal.

About 83% of the orders came from Asia, 16% from Europe and 1% from others. Funds accounted for 44%, banks 30%, private banks 18%, insurers 4% and other 4%.

Defensive stance urged

Investors should consider a more defensive posture when it comes to emerging markets assets, according to a report from RBC Capital Markets.

"We switched our tactical bias to bullish in late March as the anticipated first-quarter underperformance that we had expected was coming to a close and fund flows began to recover," the report said. "We now believe it is prudent to shift our tactical bias once again to a more defensive posture."

The reason, according to RBC, is that the global growth cycle appears to have peaked as of April, leaving EM assets at risk.

"We expect that weaker price manufacturing indexes and moderating economic growth in EM will be a trend in coming months and thus weigh on emerging markets assets," RBC said.

Volatility is increasing in commodity prices, which presents a significant risk for EM assets, given that they are so closely tied.

"We believe it would be prudent to pare back on EM exposures," the report said.

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