Southern Gas Corridor, IRSA, Shinhan, First Gulf Bank sell notes; sellers rush to buy risk

By Christine Van Dusen

Atlanta, March 17 – Azerbaijan’s Southern Gas Corridor CJSC, South Korea’s Shinhan Bank and Abu Dhabi’s First Gulf Bank PJSC were among the issuers to sell notes on a Thursday that saw rampant buying of emerging markets assets.

The spree was set off by Wednesday’s news that the Federal Reserve lowered its expectations for economic growth this year.

“Confirmation from the Fed of what many were already thinking has given a decent boost to the market,” a trader said. “With initial flows we’re seeing buyers chasing the long Turkey sovereign, Pakistan, Egypt – anything that looks to have been slightly lagging.”

The tone was strong for Latin American assets as well, with Brazil-based Vale SA recovering many of its losses from the last two days, a New York-based trader said.

“I’m seeing trace prints all over the place at higher levels,” he said. “Clients are only asking for offers ... The recent theme of too much money chasing not nearly enough paper feels like it’s really in full effect here, more than any other time during this rally. I’m not even sure how much a thicker pipeline would help here, in terms of the maddening rush to buy secondary.”

Corporates from Latin America moved higher on Thursday, with buyers searching “high and low for paper, and most of them seem to be bypassing the sticker shock they experienced a few weeks back during this rally,” another trader said.

Instead, buyers are “closing their eyes and lifting,” he said. “A few sellers have popped up here and there, but the buy-to-sell ratio is quite overwhelming.”

Colombia-based Ecopetrol SA gapped higher, though volumes and inquiry “slowed to a crawl,” he said.

Isbank sees selling

Investors were also watching Turkey’s Turkiye Is Bankasi AS (Isbank), following news that a prosecutor was seeking a sentence of between 8½ and 24½ years in prison if the company’s chairman is convicted of fuel smuggling.

The news triggered selling of the company’s bonds, a trader said.

“In current markets, investors are avoiding the headline risk as much as possible,” he said.

Meanwhile the summit between the European Union and Turkey continued.

“Last week, the EU and Turkey seemed to be close to striking a deal, which included €6 billion in funding, visa relaxations for Turkish citizens and an accelerated accession path to the EU,” a strategist said. But the latest comments from officials suggest it could be a long time before a deal is reached.

Southern Gas Corridor deal

In its new deal, Azerbaijan’s Southern Gas Corridor sold $1 billion 6 7/8% notes due March 24, 2026 at 99.112 to yield 7%, or Treasuries plus 509.7 bps, a market source said.

The pricing matched talk, set in the 7% area.

Citigroup, JPMorgan and UniCredit were the bookrunners for the Rule 144A and Regulation S deal.

The issuer is owned by the Republic of Azerbaijan and represents the country’s interest in the Southern Gas Corridor Project, a cross-border gas value chain.

In other news from Azerbaijan, market sources were whispering about a possible bond issue from the sovereign. The deal is expected to total between $1 billion and $2 billion.

“We note that Azerbaijan is a weaker-rated sovereign with further downgrade risk,” he said.

Shinhan prints bonds

South Korea’s Shinhan Bank priced $500 million 3 7/8% notes due March 24, 2026 at 99.361 to yield 3.953%, or Treasuries plus 205 bps, a market source said.

BofA Merrill Lynch, BNP Paribas, HSBC, JPMorgan, Mizuho Securities and Morgan Stanley were the bookrunners for the Rule 144A and Regulation S deal.

The lender is based in Seoul.

First Gulf Bank prices tap

In its new deal, Abu Dhabi’s First Gulf Bank priced a $150 million add-on to its existing 2 5/8% notes due Feb. 24, 2020 at 100.175 to yield 2.624734%, according to a company filing.

In February, the lender priced the original $750 million issue at 99.549 to yield mid-swaps plus 100 bps, following talk of 100 bps to 105 bps.

Citigroup, Deutsche Bank, First Gulf Bank, HSBC and ING were the bookrunners for the Regulation S deal.

IRSA guides notes

Argentina’s Inversiones y Representaciones SA (IRSA) set initial talk in the low-to-mid-9% area for a $300 million issue of notes due in seven years, a market source said.

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

The proceeds will be used to repay an intercompany loan, for working capital and for investment in tangible assets in Argentina.

IRSA, a real estate company based in Buenos Aires, was expected to price the deal late on Thursday.

YPF sets talk

Argentina’s Yacimientos Petroliferos Fiscales SA (YPF) set talk in the 8 7/8% area for a dollar-denominated issue of benchmark-sized notes due in March of 2021, a market source said.

Proceeds from the Rule 144A and Regulation S deal will be used for capital expenditures and working capital.

Other details were not immediately available on Thursday.

YPF is a petroleum and natural gas company based in Buenos Aires.

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