EM spreads narrow, liquidity dries up; new deal from Korea Gas on tap; Russian names gain

By Christine Van Dusen

Atlanta, July 22 - Korea Gas Corp. sold notes on Monday as bonds from Russia, the Middle East and North Africa received solid support, even amid the summertime slowdown.

"Few more bonds added to the squeezed list with what feels like a couple of decent-sized regional portfolios adding names at yields and cash prices they are comfortable with. Liquidity, for the most part, is dire," a London-based trader said. "It was a real summer Monday. However, there are still pockets of interest."

The Markit iTraxx SovX CEEME ex-EU index spread on Monday moved 1 basis point tighter to Treasuries plus 212 bps while the Markit iTraxx Crossover index spread - seen Friday at 406 bps - narrowed to 394 bps over Treasuries on Monday.

"U.S. Treasuries are opening relatively flat from Friday's close," a London-based analyst said. "With the stable U.S. Treasury rate, we expect syndicate desks to try and turn the primary taps fully on this week."

Indeed, several issuers advanced deals on Monday, including Turkish bottler Coca-Cola Icecek AS and South Africa's Eskom Holdings SOC Ltd.

But otherwise the session was very quiet, a New York-based trader said.

In trading on Monday, the recent bonds from Russia's OJSC Gazprom and Russian Agricultural Bank moved up.

Gazprom's 3.7% notes due 2018 priced at par, as did Russian Agricultural Bank's 3 1/8% issue due 2015.

"The Gazprom euro and Russian Agricultural Bank dollar bonds both traded well last week on the break," the analyst said. "The Gazprom 2018s are trading at 101.25, and Russian Agricultural Bank's 2018s at 101.125 this morning."

Russian, Turkish names eyed

Institutional investors haven't shown intense interest in these recent Russian corporate deals, the analyst said.

"But given the pipeline of supply, there is no real need," she said. "The main buyers were the private banks and some of the European crossover accounts."

Looking to Turkey, industrial conglomerate Koc Holding AS' bonds opened stronger on Monday after last week's lag.

The company's bonds were "about 1/2-point better this morning," she said.

Perpetuals catch a bid

Perpetual notes from the Middle East caught a bid on Monday, as did long-dated paper from the region, the London trader said.

He pointed to Saudi Electricity Co.'s 2043s, which traded Monday with a 95 handle.

In other news from the region, Abu Dhabi National Energy Co.'s (TAQA) 2013 bonds are maturing in two weeks, he said.

"That should help that curve, not that it needs much help," he said. "It trades well at the moment."

Korea Gas sells notes

In its new deal, Korea Gas priced a $500 million issue of 2 7/8% five-year notes at 99.479 to yield 2.988%, or Treasuries plus 168 bps.

Korea Development Bank, BofA Merrill Lynch, Credit Suisse, Deutsche Bank, Goldman Sachs and HSBC were the bookrunners for the deal.

Korea Gas is a public natural gas company incorporated by the Korean government.

Icecek sets size

The upcoming bond issue from Turkish bottler Coca-Cola Icecek AS will total as much as $1 billion, a market source said.

The company - owned by beverage company Anadolu Efes Biracilik Ve Malt San - has mandated Barclays, Citigroup, HSBC and JPMorgan for the deal.

The proceeds will be used for debt refinancing.

"Considering that 20% of total debt is due for refinancing in 2013 and 76% in 2014, it is not a surprise that the group will be looking to tap the financial markets," the London analyst said. "If it offers a good concession, we believe it could be an interesting investment opportunity."

Eskom on roadshow

South Africa's Eskom Holdings SOC Ltd. is on a roadshow for a possible issue of dollar-denominated notes, a market source said.

Barclays and Citigroup are the bookrunners for the Rule 144A and Regulation S deal.

The roadshow started on Monday in London and will travel to New York and Boston before wrapping up on July 26 in Los Angeles.

Eskom Holdings is an electricity provider based in Johannesburg.

CAF deal oversubscribed

The final book for Venezuela-based lender Corporacion Andina de Fomento's CHF 250 million issue of 1½% notes due Aug. 13, 2020 was more than CHF 250 million from 66 accounts, a market source said.

The deal priced at 99.621 to yield 1.557%, or mid-swaps plus 50 bps, via Credit Suisse.

About 33% of the orders came from asset managers, 33% from insurers, 28% from banks and 6% from pension funds.

Banco do Brazil sees demand

Brazil-based Banco do Brasil SA's recent €700 million issue of 3¾% notes due July 25, 2018 attracted a final book of €2.2 billion from 280 accounts, a market source said.

The notes priced at 99.442 to yield 3 7/8%, or mid-swaps plus 283.9 bps.

About 18% of the orders came from Europe, 17% from Germany, 17% from Switzerland, 17% from the United Kingdom, 9% from Asia, 8% from North America, 7% from France, 5% from the Middle East and 2% from others.

Fund managers picked up 50%, private banks 20%, banks and financial institutions 15%, insurers 10% and others 5%.

BB Securities, Bradesco BBI, Deutsche Bank, HSBC, JPMorgan and Santander were the bookrunners for the deal.

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