Chile's SMU sells notes; EM spreads tighten; Ukraine bonds under selling pressure

By Christine Van Dusen

Atlanta, Feb. 5 - Chile's Grupo SMU sold notes on a Tuesday that saw spreads narrow and risk appetite improve in the morning, then weaken into the close.

"Another day of gyrations as the market started off firmly before fading somewhat," a London-based trader said. "Still a fairly technical market, and it's quite apparent where the Street is short and long."

The Markit iTraxx SovX index spread opened Tuesday 1 basis point tighter while the corporate index narrowed by 2 bps.

"Following a risk-off day yesterday, this morning we are opening with a better tone," a London-based analyst said.

Russian quasi-sovereign bonds, including Vimpelcom, performed well during the session.

"Turkey is also opening slightly tighter," she said.

Looking to Ukraine, the sovereign curve has been under selling pressure this week, following the pricing of a $1 billion tap of its 7.8% notes due 2022 at 101.175 to yield 7 5/8%.

The notes, via JPMorgan and VTB Capital in a Rule 144A and Regulation S deal, were talked in the 7¾% area.

"The bond was quoted at 103 on the bid side when the announcement came out," said Svitlana Rusakova of Dragon Capital.

The final book was about $2 billion, she said.

"It seems that the new bonds found good demand on the market despite unusual timing," she said. "Corporates stood generally quiet with some retail demand for high-yield illiquid names."

And the recent issue of 2023 notes from Dubai was seen 20 bps tighter on the day, trading at 99¾ bid, par offered, a trader said.

"Saw buyers of Dubai's 2022s as the 2023 still trades rich on the curve," he said.

SMU does deal

In its new deal, Chile-based retail company SMU priced a $300 million issue of 7¾% notes due 2020 at par to yield 7¾%, a market source said.

The notes were talked at a yield in the high 7% to 8% area.

BTG Pactual and Deutsche Bank were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used to repay indebtedness and for general corporate purposes.

Gazprombank prices bonds

Russian lender Gazprombank OJSC priced RMB 500 million 4% notes due 2016 at par to yield 4%, a market source said.

BNP Paribas and Gazprombank were the bookrunners for the Regulation S deal.

In other news from the region, the Republic of Tatarstan is planning an issue of up to $200 million of Islamic bonds, a market source said.

The sukuk will be dollar-denominated and are expected to launch this year.

Indonesia, Edcon ahead

Indonesia has mandated Deutsche Bank, JPMorgan and Standard Chartered Bank for a dollar-denominated issue of notes, a market source said.

The deal is expected to come to the market during the first half of this year.

And South Africa-based retail company Edcon Pty. Ltd. is planning a €325 million-equivalent issue of 9½% euro- and dollar-denominated notes due in 2018, according to a company announcement.

Proceeds from the Rule 144A and Regulation S deal will be used to finance the repurchase of the company's floating-rate notes due in 2014.

Market sources were also whispering about a possible issue of $1 billion of notes this spring from Costa Rica.

New issue from GeoPark

This activity followed the Monday pricing of Argentina-based oil and gas company GeoPark Holdings' $300 million issue of 7½% senior notes due 2020.

The notes came to the market at 99.332 to yield 7 5/8% after price talk of 7¾% to 8%.

Itau BBA, JPMorgan and BTG Pactual were the bookrunners for the Rule 144A and Regulation S deal.

ADIB trades up

In other trading, the 6 3/8% perpetual Islamic bonds that Abu Dhabi Islamic Bank priced at par opened on Tuesday at 102 7/8 bid, 103 3/8 offered.

Abu Dhabi Islamic Bank, HSBC, Morgan Stanley, National Bank of Abu Dhabi and Standard Chartered Bank were the bookrunners for the Regulation S-only sukuk.

"Saw buyers first thing," he said.

Later in the session, the perpetuals were quoted at 103.10 bid, 103.60 offered.

Bahrain notes pull back

From Bahrain, the sovereign's 2020s and 2022s have pulled back nearly 20 bps over the week, the London trader said.

"Bahrain's 2020s and 2022s traded lower, but obviously tighter on spread," he said. "They are the best part of 20 bps wider on the week now, and the 2022s are 3 points off the high."

And notes from Bahrain's BBK were well supported, with the lender's 2015s trading at 103¼ bid, 104¼ offered.

IPIC trades well

International Petroleum Investment Co.'s 2041s continued to trade well, and demand was noted for Emaar Properties' 2019s trading between 108 and 1083/4.

"Emirates' 2025 seems to have recovered, having hit 98¼ on Friday," he said. "Closing at 98.80 on the bid side. Emirates' 2016 has suffered, moving 50 bps wider on the week."

Trading of bonds from Qatar's Qtel International was mixed, a trader said.

"Generally, it again feels like there's paper around on the older and higher-dollar bonds, and the Street is happy bidding the lower-dollar priced ones," he said. "The Qatar belly looks good on spread. The 2019s and 2020s have been beaten up and moved 20 bps wider over the week."

Aldar Properties also suffered, with its bonds closing in the 108.12 to 108.62 area.

Africa in focus

In trading from Africa, sellers were seen for notes from Angola, Zambia and Senegal, a trader said.

"Even Nigeria is offered, having done so well for so long," he said. "South Africa felt like some paper was taken out, as the sovereign curve there closes 9 bps to 12 bps tighter."

Egypt's bonds continued to underperform, with the 2040 widening by 50 bps on the week.

NLMK on deck

The London-based analyst was keeping her eye on the upcoming issue of dollar notes planned by Russia's OJSC Novolipetsk Steel (NLMK).

The steel company is on a roadshow this week for a Rule 144A and Regulation S deal.

"The group has $1.9 billion of debt maturing this year and half of it this quarter. We continue to like the credit fundamentals," she said. "Tenor and size are unclear yet, and as such determining a fair value at this point is difficult. However, we believe there will be value if the new issue comes at a premium to the Severstal curve."

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