Turkey widens at notes issue; Qatar under pressure; Cementos de Chihuahua launches tender

By Rebecca Melvin

New York, June 7 – The Republic of Turkey priced €1 billion of 3¼% eight-year notes below par on Wednesday after that nation’s debt market opened strong, but sold off suddenly in reaction to news the Turkish parliament was voting to fast track troops to Qatar, a market source said.

Ahead of pricing of the Turkish euro deal, the market opened “quite well bid and tighter by about two basis points, but after a swift change of sentiment, it was wider by about four bps,” a London-based market source told Prospect News.

The terms for the euro deal were deemed not terribly interesting, but news that Turkish lawmakers adopted a law late Wednesday to allow Turkish troops to be stationed in Qatar “spooked” investors, the market source said.

Two draft bills, one fast-tracking troops and a second approving an accord between Turkey and Qatar on military training, were drawn up before this week’s events. The move to fast track the bill coincided with news on Monday that four Arab nations – Saudi Arabia, the United Arab Emirates, Bahrain and Egypt – severed diplomatic ties with Qatar, accusing the Gulf State of backing and aiding terrorism.

In Ankara on Wednesday, Turkish President Recep Erdogan said in a speech that “presenting Qatar as a supporter of terrorism is a serious accusation.” He said Turkey supported Qatar as a long-time ally but he was also careful not to be critical of Saudi Arabia.

A second source said that the political news could not have rattled investors too much since the €1 billion deal got done. And in addition, Turkey-based Yapi ve Kredi Bankasi AS (Yapi Kredi) priced 500 million lira-denominated three-year notes at par to yield 13 1/8%. That compared to price talk in the 13¼% area.

Further details on trading of the local-currency-denominated deal, which is the equivalent of about $141 million, were not available.

In the secondary space, Qatar, which reeled for the better part of two days from its forced breakoff of diplomatic and commercial ties with the four Middle Eastern countries, was flat to weaker on Wednesday. S&P cut Qatar’s long-term rating to AA- from AA, citing the regional dispute.

Qatar’s 6.55% notes due 2019 were indicated at 107.43 bid, 107.93 offered, which was within the market quoted for this bond on Tuesday at 107¼ bid, 108 offered.

Its 2 3/8% notes due 2021 were indicated at 98.12 bid, 98.62 offered, which was down from 98.62 bid, 99.12 offered on Tuesday.

The longer-dated 6.4% bonds of 2040 were seen 129.68 bod, 130.68 offered, compared to 130 bid, 131 offered.

In Latin America, Venezuela’s and Brazil’s credit markets were mostly treading water, a New York-based analyst said. But in Mexico, Grupo Cementos de Chihuahua SAB de CV launched a cash tender offer and consent solicitation for its $260 million of outstanding 8 1/8% senior notes due 2020.

The company is also soliciting consents to amend the notes to eliminate restrictive covenants and some events of default.

The purchase price will be $1,044.63 for each $1,000 principal amount of notes if tendered ahead of an early deadline on June 20. If tendered after that date but before July 5, when the tender will end, holders will receive $1,014.63 per $1,000 principal amount.

Citigroup Global Markets is the dealer manager and solicitation agent.

Turkey euro notes

Turkey’s deal to sell €1 billion of 3¼% eight-year notes at an issue price of 99.123 was 2.5 times oversubscribed.

Pricing came at the wide end of talk for a mid-swaps plus 280 bps to 285 bps. BNP Paribas, HSBC Bank plc and UniCredit Bank AG were joint bookrunners for the deal.

“I didn’t find it particularly interesting. The pricing didn’t really give much new issue concession,” a market source said.

The source also cited liquidity concerns for the euro deal. “We will have to wait and see” how it performs in the aftermarket.

© 2015 Prospect News.
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