Buyers abound for EM amid mixed spreads, thin trading; Temasek, Icecek pick bookrunners

By Christine Van Dusen

Atlanta, July 8 - Emerging markets assets saw better buyers on a Monday that started off hectic and petered out by the end of the session with mixed spreads and illiquidity.

"Certainly the relative strength in rates did help the market, and for choice this afternoon there were better buyers around, albeit plenty were of the semi-professional variety looking to pounce on any slight mis-pricings," a London-based trader said. "One thing that was very much apparent was the thinness and illiquidity today, especially this afternoon. This is probably a taste of the Mondays and Fridays of the next few months with Ramadan and summer kicking in."

The Markit iTraxx SovX CEEME ex-EU index opened on Monday at Treasuries plus 239 basis points, wider by 13 bps from Friday. The Markit iTraxx Crossover index spread - seen Friday at 439.5 bps - moved Monday to 446 bps.

"Spreads were a real mixed bag," the London-based trader said. "Spreads were wider on the day but many are still holding with decent week-on-week spread tightening."

Meanwhile, credit default swap spreads in Turkey opened flat on Monday while sovereign cash bonds were as much as 5 bps tighter.

"Friday's strong non-farm payroll numbers saw US Treasuries sell off to reach 2.7%, although they are opening relatively unchanged this morning," a London-based analyst said. "Despite the strong move, our market is holding up resiliently."

Several Russian corporate issuers experienced some selling on Monday after downgrades from Moody's Investors Service, the analyst said.

"Moody's downgraded Sberbank, VTB and Russian Agricultural Bank late on Friday," she said. "We are naturally seeing selling, although bonds have yet to settle."

Middle East in focus

In other trading on Monday, Saudi Electricity Co.'s 2022s were seen at 101 to 101.65, about 28 bps tighter on the week. And Qatar's 2023 bonds were about 20 bps tighter on the week.

"Lower dollar-priced sukuk," a trader said. "Holds very well."

Retail buyers were spotted for Emirates NBD's perpetual notes between 92 and 93, the trader said.

"The Middle East and North Africa are catching up from Friday," the analyst said. "They're generally 5 bps to 10 bps wider."

Perpetuals attract buyers

The perpetual notes that Dubai Islamic Bank priced at par were seen Monday at 97.37 bid, 98 offered, while the perpetuals from Abu Dhabi Islamic Bank, which also priced at par, moved to 98¾ bid, 99¾ offered.

"Definitely some perpetual buyers around today," the London trader said. "They held in well.

And South Africa's 2014s traded Monday at 104¼ bid, 104½ offered, a trader said.

Icecek taps banks

Turkey's Coca-Cola Icecek AS has mandated Barclays, Citigroup, HSBC and JPMorgan for an issue of international bonds, a market source said.

The company previously announced plans for a €300 million offering of notes via bookrunners RBS and Citigroup.

Coca-Cola Icecek is a bottler based in Istanbul.

Temasek mandates leads

Singapore's Temasek Holding Ltd. has mandated DBS and UBS to arrange a roadshow starting July 15, a market source said.

And Indonesia is planning to issue dollar-denominated bonds, a market source said.

No other details were immediately available on Monday.

The sovereign previously announced plans for an issue of Islamic bonds, to come to the market this fall.

Norilsk Nickel could do deal

Russia's OJSC MMC Norilsk Nickel could issue dollar-denominated notes sometime this fall, the London analyst said.

"This is clearly highlighting our cautious view ... in terms of corporate governance, shareholder friendly activities and liquidity concerns," she said. "A potential new bond not only will highlight but also increase supply pressure on existing paper."

The proceeds are likely to be used for operating activity and refinancing, though the analyst posits that Norilsk will use them to fund dividend obligations.

"For 2013 and 2014, dividends will amount to $3 billion annually," she said. "The dividend story is clearly worrying."

Uralkali ponders issuance

Russia-based potash producer Uralkali is looking to price an issue of new bonds and tap existing notes, a market source said.

In June the company said it was considering a tap of its existing $650 million 3.723% five-year notes that priced at par to yield mid-swaps plus 285 bps.

BofA Merrill Lynch, Goldman Sachs, Sberbank and VTB Capital were the bookrunners for the original Rule 144A and Regulation S deal.

The new deal is likely to come to the market later this year.

The proceeds will be used to refinance debt.

VEB sets issue size

Russia's Vnesheconombank (VEB) has set the size at $1 billion to $1.5 billion for its upcoming issue of notes, a market source said.

The bonds are expected to come to the market this fall.

Initially, VEB had planned to issue the notes this month.

VEB is a Moscow-based lender.

Gazprombank postpones deal

Russia's Gazprombank OJSC has postponed its planned issue of benchmark-sized Swiss franc-denominated notes due to "heightened market volatility," according to a company announcement.

The Moscow-based lender conducted a roadshow earlier this month.

The proposed deal "generated broads demand from private banks, family offices and money managers," the announcement said.

But Gazprombank did not have "the expected confidence" to go forward with the deal in its benchmark size, the company said.

Credit Suisse and UBS were the bookrunners for the deal.

In April the Moscow-based lender announced plans for up to $4 billion of notes this year.

Nigeria notes attract orders

The final book for Nigeria's $1 billion of notes in two-tranches due 2018 and 2022 was a total of $4 billion, a market source said.

Citigroup and Deutsche Bank were the bookrunners for the Rule 144A and Regulation S deal

The deal included $500 million 5 1/8% notes due 2018 that priced at 98.917 to yield 5 3/8%. This tranche attracted 57% of its orders from the United States, 25% from the United Kingdom, 12% from other Europe, 2% from the Middle East and Africa and 4% from other nations.

The second tranche - $500 million 6¾% notes due 2023 that came to the market at 98.193 to yield 6 1/8% - got 79% of its orders from asset managers. Banks and private banks accounted for 13% and hedge funds 6%. About 2% of the orders came from pension funds and insurers.

The proceeds will be used to finance infrastructure investments.

Banks like Korea National Oil

Korea National Oil Corp.'s new issue of CHF 240 million 1 5/8% notes due 2018 that priced at 100.246 to yield 1.671%, or mid-swaps plus 88 bps, drew most of its orders from banks, a market source said.

About 40% of the orders went to banks, 30% for asset managers, 19% to insurers and 11% to private banks.

Credit Suisse, BNP Paribas and UBS were the bookrunners for the deal.

Korea National Oil is an oil and gas production and exploration company based in Anyang, South Korea.

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