Beijing Enterprises Water, Zijin Mining print notes; EM resilient ahead of Greece vote

By Christine Van Dusen

Atlanta, June 28 - Even as Greece erupted into violent protests ahead of an upcoming vote on spending cuts and tax hikes, emerging markets assets had a solid start on Tuesday, with investors hustling to move money before the summertime doldrums truly set in.

"Greek fears are replaced by a rush to invest cash before half-year-end," a London-based trader said. "Window dressing? Short covering? Well, whatever it was, good demand was sighted from the word go and then in the afternoon, pent-up local demand saw the market hold those gains and more."

Said another trader: "After three days in hiding, the Street burst back into life with liquidity seemingly available across the whole spectrum."

Against this backdrop, two Asian issuers - Beijing Enterprises Water Group Ltd. and Zijin Mining Group Co. Ltd. - sold notes while India-based Essar Services Mauritius/Aegis Ltd. and Abu Dhabi-based Dolphin Energy Ltd. LLC postponed deals.

"With the Greek vote coming and a U.S. long weekend and a UAE holiday Thursday, this window this week looks to be closing," the London trader said.

The JPMorgan Emerging Markets Bond Index Plus spread opened steady at Treasuries plus 290 basis points, near the middle of the recent trading range. But spreads tightened 5 bps to 8 bps as the day went on.

"Greece concerns? Not in this market, and certainly not today," he said. "I suspect more investors, especially locals flush with cash, continue to use any sell-offs and pullbacks as opportunities to add, and those that missed out on the selling pressure Friday were out in force today."

Particular demand was seen for paper from Qatar, Dubai and Abu Dhabi.

Middle East in focus

In trading, buyers were seen for International Petroleum Investment Co., as well as Abu Dhabi-based Mubadala Development Co. PJSC's 2021 notes, which tarded at 101.12 bid, 101.37 offered, or 7 bps tighter.

Local demand was also noted for Abu Dhabi Islamic Bank and Abu Dhabi's Tourism Development & Investment Co. (TDIC).

"We might just be taking a brief pause here after the manic lift-a-thon," a trader said. "These markets always come back, and the snap-back has happened this morning."

Dubai opened the day 3 bps to 5 bps tighter, and Abu Dhabi was very solid, while Bahrain-based BBK's 2015s were 10 bps tighter.

"We really did see some decent demand today for paper, expecially from the region," he said.

Turkey sovereign firms

Looking to Turkey, the sovereign curve was firmer at the open and buying interest was noted for Garanti Bankasi AS' 2021s and Yuksel Insaat AS' 2015s. Selling interest was seen for Garanti's 2017s.

"Turkish corporates are very subdued," a trader said. "The banks have been underperforming the sovereign paper, which is understandable, given the new issues on the pipeline and the new regulations. However, the spread differential is slowly starting to look interesting again."

In other trading, a pretty solid tone was seen in Africa, with Nigeria's 2021s trading in the Street at 104.5 a few times and GTB Finance BV's 2016s back to a 102 handle.

"Gabon and Ghana were better bid," he said.

Ukraine tightens

Also on Tuesday, Ukraine bonds started the day on the list of underperformers before tigthening 25 bps, a trader said. And Bank of Moscow's bonds remained in focus.

"I still think Bank of Moscow's bonds look rich here if the magnitude of the problems is as bad as initially reported," a trader said. "Surely owning Alfa Bank makes more sense."

Much of the activity in Russia focused on the recent issue of notes from VimpelCom Holdings BV, which on June 22 priced $2.2 billion notes due 2014, 2017 and 2022.

"The new issues have nearly clawed their way back to reoffer, now at 991/2," a trader said. "Given that VimpelCom trades wide to Severstal, it's easy to argue there is some relative value."

Meanwhile, Kazakhstan's BTA Bank opened firmer, then jumped up 4 points.

"That's yielding only 20% as selling pressure now focuses on Kazkommertsbank JSC," he said.

Beijing Water prints notes

In its new deal, Hong Kong-based investment company Beijing Enterprises Water Group priced a two-tranche RMB 1.45 billion issue of notes due 2014 and 2016, according to a company filing.

The deal included RMB 1 billion 3¾% notes due June 30, 2014 that priced at par and RMB 450 million 5% notes due June 30, 2016 that priced at par.

Goldman Sachs, Bank of America Merrill Lynch and Morgan Stanley were the bookrunners for the Regulation S issue of notes, which includes a change-of-control put at 101%.

Proceeds will be used to make shareholder loans to subsidiaries, to finance capital expenditures, for general corporate purposes and for working capital for the company, which focuses on sewage and water treatment.

Zijin Mining does deal

Also from Asia, China-based metals producer and refiner Zijin Mining Group priced $280 million 4¼% notes due 2016 at 99.276, according to a company filing.

BOCI Asia Ltd. was 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.

Other details were not immediately available on Tuesday.

Essar, Dolphin shelve notes

In other deal-related news, India-based outsourcing services provider Essar Services Mauritius/Aegis has postponed a planned $300 million offering of five-year senior notes due to market conditions, market sources said.

Deutsche Bank Securities Inc., UBS Investment Bank and Standard Chartered Bank were the joint physical bookrunners.

Proceeds were to be used to repay debt and for general corporate purposes.

Also delaying a deal was Abu Dhabi-based Dolphin Energy. The energy company had planned to issue up to $1.93 billion notes but is postponing due to market conditions, a market source said.

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

Greece vote ahead

All of this took place amid continued concern about Greece and its upcoming vote on new austerity measures, which market-watchers say may be necessary to avoid default.

"On balance, our G-10 strategy colleagues believe the austerity measures will be narrowly approved by the Greek parliament, despite the current widespread strikes and protests," according to a report from RBC Capital Markets. "A vote on the framework of the package is now expected tomorrow with the vote on the specifics following on Thursday."

Trade unions went on strike while protestors set fires and police fired teargas in Athens.

Paul A. Harris contributed to this report

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