Promsvyazbank, Hypermarcas price bonds amid continued EM weakness; Mubadala in focus

By Christine Van Dusen

Atlanta, April 15 - Russia's OJSC Promsvyazbank and Brazil's Hypermarcas SA sold notes on Friday as emerging markets assets stayed weak and trading activity remained high for the new $1.5 billion notes from Abu Dhabi-based investment vehicle Mubadala Development Co. PJSC.

"Emerging markets have remained somewhat in the background this week, reflecting general global market weakness as worries resurfaced about the direction of economic growth and the well-being of Japan in particular," a London-based market source said. "The weaker outlook in the U.S. encouraged a rally in Treasuries which was not matched in EM bonds, with most global sovereigns keeping prices level, and hence spreads wider."

Indeed, the JPMorgan Emerging Markets Bond Index Plus spread ended the week at Treasuries plus 260 basis points, wider by 15 bps over the previous week.

Primary sees movement

In its new deal, Russia's Promsvyazbank priced $500 million notes due April 25, 2014 at par to yield 6.2%, a market source said.

Deutsche Bank, JPMorgan and Promsvyazbank were the bookrunners for the Rule 144A and Regulation S deal.

"This was helped by its Commerzbank and the European Bank for Reconstruction and Development shareholding," a market source said.

And Brazil-based health and personal care products manufacturer Hypermarcas sold $750 million 6½% notes due April 20, 2021 at 98.203 to yield 6¾%, a market source said.

Bradesco BBI, Citigroup, HSBC, Itau and JPMorgan were the bookrunners for the Rule 144A and Regulation S transaction.

Proceeds will be used to repay debt, for working capital and for general corporate purposes.

Tinkoff, Rusal do deals

These deals followed the late-Thursday pricing of another deal from Russia. Credit card and consumer lending company CJSC Tinkoff Credit Systems Bank sold $175 million senior notes due April 21, 2014 at par to yield 11½%, a market source said.

The notes priced at the tight end of talk, which was set at the 11½% to 12% range.

Citigroup and Goldman Sachs were the bookrunners for the Regulation S-only notes.

Also from Russia, aluminum company United Co. Rusal plc priced RUB 15 billion notes with a coupon of 8½% for a four-year period, according to a company filing.

The notes came in below price talk, which was set at the 8.7% to 9% area.

After the four years, the bonds will be subject to a put option and a coupon rate revision.

This new deal follows the company's March 1 pricing of RUB 15 billion notes due 2018 with an 8.3% coupon. Those notes priced below initial guidance of 9% to 9½% and include a put option in 2014.

Poland prices notes

In another new deal, the Republic of Poland sold $1 billion 5 1/8% senior notes due April 21, 2021 at 98.831 to yield 5.277%, or mid-swaps plus 170 bps, a market source said.

Citigroup, Goldman Sachs and RBS were the bookrunners for the Securities and Exchange Commission-registered notes.

Proceeds will be used for general governmental purposes and to finance borrowing requirements.

On Friday the notes were seen trading at 99 bid, 99.20 offered.

About 54% of the orders came from the United States, 30% from Europe, 11% from Asia and 5% from Poland. Asset managers accounted for 56%, central banks 10%, pension funds and insurance companies 14% and commercial banks 10%.

Syndicate Bank taps dealers

In other deal-related news, India-based commercial lender Syndicate Bank has mandated Merrill Lynch, Barclays Capital, Citigroup, Deutsche Bank, HSBC, JPMorgan, RBS and Standard Chartered for a possible issue of dollar-denominated notes and a roadshow, a market source said.

The marketing trip started Friday and will travel through London, Singapore and Hong Kong.

A Regulation S transaction is expected to follow.

And Abu Dhabi-based developer Tourism Development & Investment Co. plans to issue a $1 billion bond in 2012, a market source said.

The proceeds will be used for construction and other projects.

No other details were immediately available on Friday.

Mubadala in focus

The new $1.5 billion two-tranche issue of notes from Abu Dhabi's Mubadala remained top of mind for many EM traders on Friday.

The deal included $750 million 3¾% notes due April 20, 2016, which priced at 98.975 to yield Treasuries plus 180 bps. 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.

"They took a hit, spread-wise, and there are still a few loose bonds flying around," a trader said.

Bonds trade up

Mubadala's 2016 notes opened Friday at 99.35 bid, 99.45 offered and were later seen at 99.37 bid, 99.47 offered. The 2021 notes opened at 100.05 bid, 100.25 offered and later traded at 100.10 bid, 100.20 offered.

"Both deals are off the tights but still better versus their launch," a trader said. "People have cottoned onto the richness of the International Petroleum Investment Co. 20s versus the Mubadala 21s now. The IPIC 21s still look like an OK value. I would expect the Mubadala 21s to converge closer to IPIC's over the next week."

In other trading on Friday, Kuwait saw better buyers and names from Saudi Arabia saw some decent demand, the trader said.

"We've seen demand on the Sabic Capital 2015 dollar bonds as of late," he said.

Those notes were seen trading as high as 106 bid, 107 offered on Friday.

And Mexico's bonds continued to flatten while Peru recovered somewhat but still saw its credit default swaps at 150 bps, wider by 50 bps compared to Mexico, a Toronto-based market source said.

GarantiBank tightens 6 bps

The trader was also keeping an eye on the new two-tranche issue of $800 million notes due 2021 and 2016 from Turkey's Turkiye Garanti Bankasi AS (GarantiBank).

The deal included $500 million 6¼% notes due 2021 that came to market at 98.086 to yield 6 3/8%. The second tranche totaled $300 million floating-rate notes due 2016 that priced at par to yield Libor plus 250 bps.

Deutsche Bank, Goldman Sachs, JPMorgan and Standard Chartered Bank were the bookrunners for the deal.

"The 2021s traded as tight as 12.5 bps in the morning but faded to close the show only 6 bps tighter," he said. "We have a positive view on this new issue."

Meanwhile the Turkey sovereign bonds were up on Friday and some better buying was seen for the Yasar Holding AS 2015s while better selling was seen Yuksel Insaat AS' 2015s.

Inflows recorded

Inflows into emerging markets bond funds totaled $306 million for the week ended April 13, down from the previous week's $898 million inflows, but still part of a recent turnaround, according to data tracker EPFR Global.

"Certainly last week there was inflation and dollar weakness. There's still some focus on inflation, but given that the end of quantitative easing is in sight and there's some effort to curb the U.S. deficit, the case for dollar weakness isn't quite as strong," said Cameron Brandt, senior analyst with EPFR.

"I think that what will happen over the next week or so is that the pendulum will start to swing a bit more toward EM. It certainly seems as if the developed market story has really run into some pretty strong headwinds over the last couple of weeks."

Future for inflows uncertain

The flow of funds is likely to remain an important driver of EM returns, according to an RBC report.

"Inflows slowed this week but remained positive," the report said. "It will be key to track how this trend evolves, though we would expect a return to sustained large inflows into EM only if the external global backdrop stabilized or potentially after a more sizable correction."

Indeed, it's not assumed that inflows will remain in positive territory, Brandt said.

"I don't want to sound wishy-washy, but there's an unnatural convergence of very big drivers for both the debt and equity markets," he said. "There are a lot of big variables out there at the moment, none of which have unveiled their full colors."

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