Risk gains favor, spreads tighten post-QE; Lukoil, PTA Bank, Arcor, Sinochem sell notes

By Christine Van Dusen

Atlanta, Nov. 4 - Emerging market issuers priced and planned new deals while investors bought up paper on Thursday, emboldened by the previous day's news of further quantitative easing by the United States.

Though the Federal Reserve's plan to buy $600 billion in shorter-duration bonds by the end of June 2011 undershot expectations - and some investors were still trying to make sense of the news - sentiment toward emerging market assets "remained positive," a market source said.

"Things are flying all over the place," a New York-based market source said. "It's so busy."

Among the issuers to bring new deals to market were Russia's Lukoil, UAE's Ras Al-Khaimah, Brazil's General Shopping Finance, Burundi's PTA Bank, Argentina's Arcor and Banco do Nordeste do Brasil.

Deutsche Bank, HSBC and UBS were the bookrunners for the Rule 144A and Regulation S deal, which was talked at a spread in the Treasuries plus 300 bps area.

Banco do Nordeste do Brasil is a lender based in Fortaleza, Brazil.

"It's really busy," said Luz Padilla, portfolio manager for the DoubleLine Emerging Markets Fixed Income Fund. "The pipeline is open. There are still quite a lot of new deals across the board. We're just trying to get through them."

Spreads decline

For most risk markets, "everything is up," Padilla said. "There's just a lot of buying across the board. Everything is being bought."

Spreads have tightened, a Toronto-based market source said, pointing in particular to Argentina and Venezuela, which ended the day tighter by 20 bps and 49 bps, respectively.

But the JPMorgan Emerging Markets Bond Index Plus closed nearly unchanged.

"There weren't large moves," he said. "There's been some mixed performance."

While he noted the fever pitch on Thursday, he said there was likely some uncertainty in the market about just how effective this round of quantitative easing will be.

"I guess we'll have to see how the trend settles," he said. "I think there's some uncertainty if you look at the Treasury curve today. It started flattening and now it's steepening. I think there have been a lot of back and forth moves since yesterday's announcement. People are still sorting through it."

Lukoil prices

Russia-based oil and energy company Lukoil International Finance BV priced a $200 million tap of its 6 1/8% notes due Nov. 9, 2020 at 102.44 to yield 5.8%, or Treasuries plus 332 bps, a market source said.

Barclays Capital, ING and RBS were the bookrunners for the Rule 144A and Regulation S deal, which was talked at a yield in the 5.9% area.

The original $800 million issue priced Oct. 29 at 99.081 to yield 6¼%, or Treasuries plus 362.3 bps.

Also from Russia, lender Vnesheconombank (VEB) mandated Citigroup, Credit Agricole, HSBC and JPMorgan as bookrunners for a dollar-denominated offering of benchmark-sized notes, a market source said.

A roadshow for the Rule 144A and Regulation S deal will be held on Monday and Tuesday.

In another deal from the banking sector, Banco do Nordeste do Brasil priced $300 million 3 5/8% notes due Nov. 9, 2015 at 99.291 at 3.782%, or Treasuries plus 275 bps, a market source said.

Deutsche Bank, HSBC and UBS were the bookrunners for the Rule 144A and Regulation S deal, which was talked at a spread in the Treasuries plus 300 bps area.

Ras Al-Khaimah prices

Thursday also saw UAE's Ras Al-Khaimah price a ¥15 billion two-tranche issue of notes maturing in 2030 and 2040 via bookrunner RBS in a Regulation S deal, according to an announcement from the emirate.

The deal included ¥10 billion bonds due Nov. 8, 2040 that priced at par to yield 3.77% and ¥5 billion notes due Nov. 8, 2030 that priced at par to yield 3.58%.

A put event will occur upon a ratings downgrade.

The bonds have a one-time call on Nov. 8, 2020.

Proceeds will be used for general budgetary purposes.

Also from the Middle East, the Republic of Lebanon mandated Bank of Beirut and Credit Suisse for a two-tranche issue of notes totaling $700 million, a market source said.

The first tranche will total $500 million and mature in 2018. The second tranche will total $200 million and mature in 2022.

And Bahrain-based lender United Gulf Bank, a subsidiary of Kuwait's Kipco, mandated Standard Chartered as bookrunner for an international bond offering, a market source said.

General Shopping, Arcor do deals

In another new deal, Brazil-based retail and shopping center company General Shopping Finance priced $200 million perpetual notes at par to yield 10%, a market source said.

Bank of America Merrill Lynch and BTG Pactual were the bookrunners for the Rule 144A and Regulation S deal, which was talked at 10% to 10¼% and is non-callable for five years.

Proceeds will be used to redeem outstanding debt and finance capital expenditures.

And Argentina-based candy maker Arcor SAIC priced $200 million senior notes due 2017 at par to yield 7¼%, a market source said.

JPMorgan, Santander and BNP Paribas were the bookrunners for the Rule 144A and Regulation S deal, which was whispered to yield in the 8% area.

The notes are non-callable for four years.

Sinochem, PTA Bank print notes

Also on Thursday, Hong Kong-based business conglomerate subsidiary Sinochem Overseas Capital Co. Ltd. priced a $2 billion two-tranche issue of notes due 2020 and 2040 via Citigroup, HSBC and UBS in a Rule 144A and Regulation S transaction, a market source said.

The deal included $1.5 billion 4½% notes due Nov. 12, 2020, which priced at 99.467 to yield 4.567%, or Treasuries plus 208 bps. The tranche was talked at a spread in the Treasuries plus 210 bps area.

The second tranche totaled $500 million of 6.3% notes due Nov. 12, 2040, which priced at 99.519 to yield 6.336%, or Treasuries plus 228 bps. Price talk was set at the 230 bps area.

The notes include a change-of-control put at 101% if Sinochem ceases to own 100% or the sovereign ceases to own at least 50.1%.

And Burundi-based Eastern and Southern African Trade and Development Bank (PTA Bank) priced $300 million 6 7/8% notes due Jan. 9, 2016 at 98.909 to yield 7 1/8%, or Treasuries plus 609.4 bps, a market source said.

HSBC and Standard Chartered were the bookrunners for the Regulation S notes, which were talked at a yield in the 7 1/8% area.

Turkish corporates plan deals

Thursday also saw Istanbul-based lender Turkiye Is Bankasi AS (Isbank) mandate JPMorgan, RBS, Standard Bank and Standard Chartered for a benchmark-sized issue of notes, a market source said.

A roadshow will be held from Monday to Wednesday. The Rule 144A and Regulation S deal is expected to price during the week of Nov. 15.

Another Turkish corporate, construction company Yuksel Insaat AS, set price guidance on Thursday. The company's planned dollar-denominated issue of five-year notes is being talked to yield in the 10% area, a market source said.

BNP Paribas and Standard Chartered Bank are the bookrunners for the Regulation S notes, which are non-callable for three years.

These planned deals aren't likely to be the last seen before the Thanksgiving holiday, Padilla said.

"Everything is lined up for this to continue," she said.

Korea National Oil oversubscribed

In other news, the final book for Korea National Oil Corp.'s $700 million 2 7/8% notes due Nov. 9, 2015 - which priced this week at 99.838 to yield Treasuries plus 175 bps - was $1.25 billion with 113 accounts involved, a market source said.

About 33% came from Europe, 32% from the United States, 15% from Japan and 20% from Asia without Japan.

Funds accounted for 41%, banks and financial companies 32%, central banks 16%, insurers 6% and others 5%.

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