Czech Railways, Byblos Bank sell notes; Greece picture improves but volumes, issuance thin

By Christine Van Dusen

Atlanta, June 17 - Though risk appetite recovered somewhat on Friday on optimism about a new bailout package for Greece - and the news that Germany was taking a less strident view on private sector burden-sharing - volumes remained low and issuance thin for emerging markets assets.

"Until there is some clarity on how Greece will be bailed out again, EM will remain in defensive mode," a trader said.

Among the issuers to do deals against this backdrop were Prague-based Czech Railways and Lebanon's Byblos Bank SAL. And China's Zijin Mining Group Co. Ltd. planned notes.

"Volumes overall are below average," a London-based trader said. "Dealers are tired, and it's been a long week. Who knows what headlines might come out over the weekend?"

The JPMorgan Emerging Markets Bond Index Plus spread finished the week wider by 10 basis points.

"Given the weak data tone globally may persist for a few more weeks and rising Greece and euro zone event risks, we believe it is prudent to remain defensive, for now," according to a report from RBC Capital Markets.

Czech Rail, Byblos do deals

In its new deal, Prague-based Czech Railways sold €300 million 4½% notes due June 24, 2016 at 99.479 to yield 4.619%, or mid-swaps plus 190 bps, a market source said.

Barclays Capital, Erste and Societe Generale were the bookrunners for the Regulation S notes, which include a change-of-control put at 100% if the government ceases to own 75% or if a restructuring event results in a downgrade to below investment grade.

And Lebanon-based lender Byblos Bank priced $300 million 7% notes due June 24, 2021 at par, a market source said.

Byblos Bank was the bookrunner for the Regulation S notes, which priced in line with talk of 7%.

Zijin, Dolphin ahead

In other deal-related news, China-based metals producer and refiner Zijin Mining Group Co Ltd. is planning an issue of dollar-denominated notes, according to a company filing.

BOCI Asia Ltd. is the bookrunner for the Regulation S notes.

Proceeds will be used for overseas activities, including as capital for acquiring copper concentrates overseas for a subsidiary's smelter project.

Looking ahead to the June 20 week, market-watchers are awaiting the planned issue of notes from Abu Dhabi's Dolphin Energy Ltd. LLC, which is looking to issue up to $1.93 billion of notes.

RBS, BNP Paribas, Abu Dhabi Commercial Bank, Mitsubishi UFJ Securities and Societe Generale are the bookrunners for the Rule 144A and Regulation S notes.

"The Dolphin supply is likely next week," a trader said. "It's a probable bullet and amortizer. The key obviously is pricing, but generally a bullet structure should appeal locally."

Dubai in demand

The final book for Dubai's recent deal - $500 million 5.591% notes due 2021 that priced at par - was $1.8 billion with more than 90 accounts involved, a source said.

About 35% came from Europe, 24% from the United Kingdom, 21% from the Middle East, 11% from Switzerland and 9% from Asia. Fund managers accounted for 45%, banks 37%, private banks 10%, insurers 3% and others 5%.

Emirates NBD, HSBC, RBS and UBS were the bookrunners for the Regulation S-only notes, which include a put option in five years. Proceeds will be used for general budgetary purposes.

The notes were trading Friday between 99.65 and 99.75, a trader said.

KOKS active

In other trading, the $500 million 7¾% notes due 2016 that Russia-based coke and pig iron producer KOKS Group sold on Thursday were seen at 100.45 bid, 100.65 offered on Friday, a trader said.

"There's lots of retail activity in KOKS, but elsewhere the market remains very heavy," he said.

Later in the session, the notes were trading at 100.40 bid, 100.60 offered.

Bank of America Merrill Lynch, Credit Suisse, Troika Dialog and VTB Capital were the bookrunners for the Rule 144A and Regulation S notes.

"They got their deal away at 7¾%, which is very impressive under the conditions," another trader said.

Garanti sees buyers

Looking to Turkey, most corporates were unchanged on Friday and the longer end of the sovereign curve was slightly firmer, a trader said.

He also noted buying for Turkey-based Turkiye Garanti Bankasi AS' 2021 notes, which came to the market at 98.086 on April 14. The notes were trading Friday at 96.75 bid, 97.50 offered.

"It was a very lackluster session for Turkish paper today," he said. "We've seen some interest in Garanti's 2021s, but mainly the long end of the sovereign curve had most of the activity."

However, he said, the sovereign curve sold into the close and closed the week in the red.

Qatar sees sellers

Also on Friday, Qatar saw good volumes and selling, a trader said. And Lebanon saw good demand.

Russia had a quiet day, with little activity for Alfa Bank and quasi-sovereigns.

The trader also noted a quiet tone in Africa, though he was impressed with Nigeria's 2021 dollar notes.

"They continue to hold well," he said.

The notes were trading at 105 bid, 105.5 offered after pricing on Jan. 20 at 98.223.

"Ukraine is still offering amazing liquidity in the sovereign space," another trader said. "That's bouncing 10 bps into the close."

Voluntary rollover possible

Taking a closer look at the Greece issue, Barclays Capital released a report on the top holders of Greek debt. The top 30 holders account for more than 70% of the total, according to the report.

The top debt holder is the Eurosystem Securities Markets Programme, followed by European Union loans. Also in the top tier are Greek public sector funds, International Monetary Fund loans and the National Bank of Greece.

"The high concentration of holdings, and the type of institutions involved, suggests that some kind of voluntary rollover or Vienna initiative might have more take-up than one might expect at first glance," Barclays said. "Having a participation of €25 billion in such an initiative over the coming three years seems plausible, in our view."

In other news, inflows into emerging markets bond funds totaled $552 million for the week ended June 15, according to data tracker EPFR Global. About $410 million flowed into funds with local currency mandates.

During the previous week, inflows totaled $1.36 billion.

"The asset class is getting increasing support from European and, to a lesser extent, U.S. institutional investors who appear to be jumping in whenever prices tick down," said Cameron Brandt, senior analyst with EPFR. "So the recent rise in risk aversion has had a muted effect on flows."

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