Turkey, Vakifbank eyed; Saudi Arabia shelves deal; ADB, Nigeria advance new issues

By Christine Van Dusen

Atlanta, Feb. 8 – Trading of Asian bonds was firm on a Wednesday that saw investors focusing on Turkey while Saudi Arabia postponed issuance and Asian Development Bank (ADB) and Nigeria lined up new deals.

Recent issues from Asia performed well in the secondary market, a trader said.

“Broader cash closed unchanged to 2 basis points tighter,” he said. “China bank seniors repriced 1 bp to 2 bps tighter in the short end.”

Ten-year notes from banks from Korea, meanwhile, were 2 bps tighter on the day.

“China oil names initially moved 2 bps wider but rallied back to flat,” he said.

The bond curve for the Philippines was unchanged to ¼ point wider while Indonesia’s curve outperformed, he said.

Turkey was in the spotlight on Wednesday after the government moved to establish a wealth fund of up to $200 billion as a means to consolidate income and create resources for long-term investments. The hope is that the fund will help strengthen the economy and protect it from market volatility.

“The move is in line with the government’s plan to boost infrastructure projects and economic growth,” a London-based analyst said. “But concerns have emerged on governance and increased political control of those companies. Already over the last few months, we have seen political pressure to lower interest rates and boost lending at state banks. Critics have highlighted a lack of independent oversight.”

Given that the majority of the assets in the fund are lira-denominated, rather than foreign-based, “it also remains unclear whether the fund can serve as a backstop to protect the Turkish economy from external vulnerabilities.”

Vakifbank in focus

In other news from Turkey, lender Turkiye Vakiflar Bankasi TAO (Vakifbank) announced its exchange results and said the consent conditions had been satisfied. The bank will issue $227,605,000 of new notes on Feb. 13, according to a company notice.

Some market-watchers believe the amount offered in the exchange was too low, a trader said.

“While we note that the weaker environment in January ironically was beneficial for the issuer in terms of pricing, due to low back-end coupon, investors remained unwilling to take up additional risks,” he said. “We would have likely considered the exchange offer as attractive in a better market environment.”

The coupon on the new notes will be 8% up to but excluding the call date and then the five-year mid-swap rate plus the 584.5 bps reset margin. The new notes were offered for exchange on a par-for-par basis.

“Given the sub-benchmark size of the new notes, we expect that some investors may decide to sell to avoid future illiquidity,” the trader said. “That said, we think that in this event it would provide an opportunities for buyers without liquidity concerns.”

Tap could be on horizon

Vakifbank could next tap the new-style notes “in order to raise the amount close to or above benchmark size,” the trader said.

In trading, Yapi Kredi’s three-year notes saw good demand.

“It’s getting hard to source,” another trader said.

South Africa’s MTN posts loss

Also receiving attention on Wednesday was South Africa’s MTN Group Ltd., which announced that it will post a loss in earnings driven primarily by a regulatory fine in Nigeria.

“The South African based mobile operator said that it was impacted by the underperformance of the Nigerian and South African business in the first half of 2016,” a trader said.

Kipco deal ahead

Additionally, investors were keeping an eye on Kuwait Projects Co. SPC Ltd. (Kipco), which is planning to issue dollar-denominated notes on Feb. 16.

HSBC is leading the deal, and the proceeds will be used to fund a tender offer for the issuer’s $500 million 4.8% notes due 2019 in order to extend the company’s debt maturity profile.

In response to the news, Kipco’s 4.8% notes due in 2019 were trading at about 104, a trader said.

Those notes priced in 2014 at par.

ADB gives guidance

For its upcoming deal, Philippines’ ADB set initial talk in the mid-swaps plus 19 bps area for a dollar-denominated issue of five-year notes, a market source said.

BofA Merrill Lynch, HSBC, Morgan Stanley and TD Securities are the bookrunners for the deal, which is expected to price this week.

ADB, based in Manila, focuses on reducing poverty in Asia and the Pacific through economic growth, environmentally sustainable growth and regional integration.

Nigeria sets tenor

Nigeria set the tenor at 15 years for a dollar-denominated issue of notes that could total $1 billion, a market source said.

Citigroup and Standard Chartered are rumored to have the mandate.

Other details were not immediately available on Wednesday.

Saudi Arabia postpones

Saudi Arabia is postponing plans for debt issuance, a market source said.

The sovereign had been expected to issue notes sometime during the first quarter of the year to help fund the budget deficit.

But now that the head of the debt management office is leaving, issuance is likely to be on hold, the source said.

Clisa prices

Argentina’s Compania Latinoamericana de Infraestructura & Servicios SA (Clisa) priced a $100 million tap of its 9½% notes due in 2023 at 98.58 to yield 9.8%, a market source said.

BCP Securities and Santander were the bookrunners.

Other details were not immediately available on Wednesday.

Clisa is a Buenos Aires-based infrastructure manager and developer.

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