Mubadala, Kexim price as spreads inch wider; GarantiBank, Tinkoff, Promsvyazbank on deck

By Christine Van Dusen

Atlanta, April 13 - Abu Dhabi's Mubadala Development Co. PJSC and South Korea's Export-Import Bank of Korea (Kexim) sold notes on Wednesday even as emerging markets assets remained in a weakened and somewhat rudderless state.

This didn't stop the march toward the market for several other issuers, including Turkey's Turkiye Garanti Bankasi AS (GarantiBank), the Republic of Hungary, Brazil's Banco Cruzeiro do Sul SA and Russia's Alfa Bank, OJSC Promsvyazbank and CJSC Tinkoff Credit Systems Bank.

The JPMorgan Emerging Markets Bond Index Plus spread closed a touch wider, 2 basis points up to Treasuries plus 259 bps, with Peru wider by 9 bps and Venezuela by 11 bps.

"Since the rally over the first week of April the credit markets have struggled to find direction," said Gavan Nolan, an analyst with Markit, in a report.

Mubadala trades up in gray

The deal that got the most attention on Wednesday was the dual-tranche issue of notes due 2016 and 2021 from Abu Dhabi-based investment vehicle Mubadala.

Early on Wednesday the notes were trading up in the gray market, with the 2016s up between 30 and 50 cents and the 2021s up 15 cents to 55 cents.

"The majority of the gray action has occurred between the plus-25 and plus-37.5, that I have seen," a London-based trader said. "We've traded both in the gray two ways."

Said another source, near the European close: "We've been very active in the Mubadala gray. At only 15 bps through the Gazprom curve, it's a reminder of how 'cheap,' in general, the Middle East and North Africa assets remain."

Mubadala prices notes

The Mubadala deal priced at the end of the New York session, with $750 million 3¾% notes due April 20, 2016 at 98.975 to yield Treasuries plus 180 bps. The notes were talked at the Treasuries plus 185 bps area.

The other tranche totaled $750 million 5½% notes due April 20, 2021, which came to market at 99.484 to yield Treasuries plus 210 bps. The notes were talked at the Treasuries plus 210 bps area.

Barclays Capital, HSBC, National Bank of Abu Dhabi, Societe Generale and Standard Chartered were the bookrunners for the Rule 144A and Regulation S notes.

The key with the deal, the London trader said, was to avoid replicating what happened with Abu Dhabi-based oil entity International Petroleum Investment Co.'s £550 million and €2.5 billion notes that priced March 9.

"That was a disaster, where there were simply too many loose bonds floating around," he said. "Mubadala has kept these deals at $750 million each, rather than the $4 billion the market was buried with on IPIC."

Middle East in focus

Also from the Middle East, Dubai's DP World continued to see its bonds perform. And Dubai Water and Electricity Authority's 2015 dollar notes looked like a decent value on the curve.

"We saw better selling of Dubai paper here, but the market is very happy to absorb the credit," a market source said. "The month moves have been stunning on the Dubai sovereign, circa 125 bps to the good."

Qatar was fairly quiet and IPIC's somewhat-battered bonds were well bid in the afternoon, closing a couple of basis points tighter. "IPIC's 2021 still looks like a good value, trading around par or 20 wide on z-spread terms," he said.

Kuwait Projects Co. Holding (Kipco) was well bid after the previous day's retirement of the company's 2011 notes.

"The 2016 dollar notes closed at 108 bid, 75 bps tighter on the month," he said.

Looking to Africa, the Ivory Coast closed Wednesday mostly unchanged while Ghana and Gabon paused after recent selling pressure, he said.

Kexim does deal

In its new deal, Kexim priced $700 million 3¾% notes due Oct. 20, 2016 at 99.332 to yield Treasuries plus 170 bps, a market source said.

HSBC, RBS, UBS, Standard Chartered and Merrill Lynch were the bookrunners for the Securities and Exchange Commission-registered transaction.

Proceeds will be used for general operations, including extending foreign currency loans and repayment of maturing debt.

GarantiBank sets price talk

Also on Wednesday, Turkey-based lender GarantiBank set price talk for its planned benchmark-sized issue of 10-year notes at the 6½% area, a market source said.

Deutsche Bank, Goldman Sachs, JPMorgan and Standard Chartered Bank are the bookrunners for the Rule 144A and Regulation S deal, which is expected to price this week.

"We believe that, although it doesn't offer masses of value versus the heavy Akbank curve - apart from the yield pick-up - Garanti has a much longer and well regarded track record on the market, and that may be better bid tomorrow, depending on the details of the issue," the London trader said.

Turkish paper gets attention

The Garanti deal could take some pressure off the five-year Turkish bank paper already in the street, a market source said

"This is bringing a lot more focus to the rapidly expanding Turkish corporate sector," he said.

In response, there was some better selling seen for Turkey-based Yuksel Insaat's 2015 bonds.

At the same time, Turkey sovereign was trading about 5 to 7 bps tighter on Wednesday morning on optimism about the country's economy.

"However, we couldn't hold on to the gains and are closing the day 2 bps tighter, in line with CDS," he said.

Banco Cruzeiro talks notes

Meanwhile, from Latin America, Brazil-based lender Banco Cruzeiro do Sul set price talk for its planned dollar-denominated issue of three-year notes at the 7 7/8% to 8% area, a market source said.

Deutsche Bank and UBS are the bookrunners for the Regulation S notes.

The sovereigns from Latin America spent the day in quiet mode, said Enrique Alvarez, debt strategist with think tank IDEAglobal.

"There's been no new addition of risk-type positions and no new exposure added to higher-beta credits," he said. "Everything is trading somewhat lackluster and sideways."

He pointed to Venezuela, which has been getting whipsawed by what's been going on in the crude oil market. The sovereign's 2038 bonds closed at 56¼ on Tuesday and were seen Wednesday at 55¾ bid.

"Most bonds are like that: tightly range-bound, bouncing around there," he said. "The sovereign debt market has lost a lot of volatility due to that fact that there's too much liquidity, and any sort of weakness is essentially soaked up."

Alfa Bank taps bookrunners

Looking to Russia, lender Alfa Bank mandated Goldman Sachs, UBS and Alfa Bank for a benchmark-sized issue of notes, a market source said.

A roadshow for the Rule 144A and Regulation S offering will be held in Europe, Asia and the United States next week.

"The Russian bank sector is really starting to come back to life," a market source said.

Case in point: Russia-based lender Promsvyazbank will soon come to market with an issue of three-year notes via Deutsche Bank, JPMorgan and Promsvyazbank in a Rule 144A and Regulation S deal.

Price talk for the notes has been set at the 6¼% to 6½% area, a market source said.

"It's been a while since they issued a senior bond, and they're looking to take advantage of the amazing performance of the recent HCFB 2014s, which now yield around 6%," he said.

Tinkoff gives guidance

Also from Russia, credit card and consumer lending company Tinkoff Credit Systems Bank set price talk for its planned issue of $150 million to $200 million notes at an 11½% to 12% yield, a market source said.

Citigroup and Goldman Sachs are the bookrunners for the Regulation S notes.

In other deal-related news, Hungary mandated Deutsche Bank, ING and Unicredit for a roadshow starting April 18, a market source said.

"I would tend to term it as an issuer's market; there aren't a lot of problems with new supply coming onscreen and being absorbed," Alvarez said. "But are [most issuers] going to jump to issue new debt? They have to be very careful."

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