Pakistan prices deal; good U.S. data doesn’t boost EM; Pemex, Albania plan marketing trips

By Christine Van Dusen

Atlanta, Sept. 24 – Emerging markets assets saw little positive impact – and Asian names experienced heavy selling – on Thursday after the release of good jobless claims numbers and better-than-expected durable goods orders from the United States.

Indonesia’s 2042s dropped lower and corporates from China were quiet while investment-grade cash notes took a defensive tone and moved slightly wider, a London-based trader said.

China-based Cnooc Ltd. bonds moved out 1 basis point to 2 bps, with sellers on the long end, another trader said.

“Korea closed unchanged,” he said. “India corporates started the day 3 bps to 5 bps wider but recovered slightly, with demand out of Europe. Financials were firmer and closed unchanged to a couple basis points wider.”

Notes from Malaysia were weak, as the currency continued to depreciate, and moved 5 bps to 10 bps wider on Thursday morning.

Against this backdrop, Pakistan priced new notes.

From Latin America, Brazil’s five-year notes were trading about 40 bps wider while the 2017s moved out by about 15 bps, a New York-based trader said.

Five-year credit default swaps spreads managed to tighten, though, narrowing to 476 bps from 480 bps. Mexico’s moved out to 164 bps from 155 bps after trading as wide as 174 bps earlier in the day, he said.

“The big story and mover of the day is Brazil, specifically [the real], which saw a massive intraday swing,” he said. “This coincided with a bounce in cash bonds as Brazil’s 2025 traded at 85 earlier and now are printing at 86.85.”

Cash prices were weaker but not at their weakest, he said, and high-yield names finished the day mixed.

Meanwhile, Petroleo Brasileiro SA’s bonds continued to suffer, another trader said.

CSN to sell assets

In other news from Latin America, bonds from Brazil’s Companhia Siderurgica Nacional (CSN) have fallen to a record low amid worries that the steel company will be unsuccessful in selling assets as part of an effort to bring in $1.5 billion.

“It is expected that slowing global growth will make it more difficult for the company to sell its noncore assets for a good price,” according to a report from Schildershoven Finance BV.

CSN is looking to bring in about $1.5 billion by selling noncore assets, which could improve the company’s liquidity, the report said.

“A rebound in bonds may occur if the company starts its assets selling program,” Schildershoven said. “Additionally it will be strongly supported when CSN concludes its deal with the Asian consortium. At the same time, we recommend that investors remain very cautious when investing in the company, as risks are very high.”

Turkcell deal on deck

Investors on Thursday were keeping an eye out for the upcoming issue of dollar-denominated notes from Turkey’s Turkcell Iletisim Hizmetleri AS.

The mobile phone company wrapped up a roadshow on Wednesday for the Rule 144A and Regulation S deal, which is expected to come to the market this week via BNP Paribas, Citigroup and HSBC.

“We assume that the issue size is $1 billion with a 10-year tenor,” a London-based trader said.

Given that the week has, so far, seen “large widening moves of Turkish credit default swaps and cash,” investors are not likely to “appreciate a $1 billion size deal,” he said.

Turk Telekom could follow with its own issuance, possibly during the first half of 2016, to fund large infrastructure needs, he said.

Pakistan sells notes

In its new deal, Pakistan sold $500 million 8¼% notes due Sept. 30, 2025 (B3//B) at par to yield 8¼%, a syndicate source said.

The notes were talked at a yield in the low-8% area.

Citigroup, Deutsche Bank and Standard Chartered were the bookrunners for the Rule 144A and Regulation S deal.

“After tapping the markets few times in the past few years, we believe Pakistan will remain a serial issuer,” a trader said, prior to the pricing. “Performance as ever will be size and price dependent.”

Pakistan’s existing 2019 6¾% sukuk is trading 34 bps inside the sovereign’s 7¼% 2019s, he said, “which makes the sukuk on the very rich end of the one-year spread range,” he said. “If you hold the sukuk, I think it makes sense to sell and reload on the new supply. Most likely the issuer will take advantage of the tighter sukuk market at some point.”

Canal Authority launches bonds

Autoridad del Canal de Panama, also known as the Panama Canal Authority (PCA), launched a $450 million issue of 20-year amortizing senior unsecured bonds at Treasuries plus 20 bps, a market source said.

The notes were talked at a spread in the 230-bps area.

BofA Merrill Lynch is the bookrunner for the Rule 144A and Regulation S deal.

The proceeds will be used to partially refund financing of the construction of the Atlantic Bridge.

The PCA is an autonomous, legal entity of Panama charged with operation, administration, management, preservation, maintenance and modernization of the Panama Canal.

Pemex sets roadshow

Mexico’s Petroleos Mexicanos SAB de CV will set out on Sept. 29 for a roadshow to market a Swiss franc-denominated issue of notes, a market source said.

BNP Paribas and Credit Suisse are leading the marketing trip, which will end on Sept. 30.

Pemex is a Mexico City-based petroleum company.

Roadshow for Albania

Albania will set out on Sept. 28 for a roadshow, a market source said.

Deutsche Bank and JPMorgan are leading the marketing trip for a possible issue of Regulation S notes.

In May, Albania announced plans for a euro-denominated deal.

The sovereign previously delayed a dollar-denominated eurobond issue that was expected to come to market in May of 2010 via JPMorgan and Deutsche Bank due to market conditions.

That deal was expected to total between $300 million and $400 million.

Weichai Power draws orders

The new issue of notes from China-based Weichai Power Co. – $400 million 4 1/8% bonds due 2020 that priced Wednesday at 99.683 to yield 4.196%, or Treasuries plus 275 bps – was more than 1½-times oversubscribed by 45 investors, a market source said.

Barclays Bank, HSBC, Goldman Sachs and BOCI Asia were the joint lead managers for the Regulation S deal. Barclays was the global coordinator.

Asian investors bought 98% and the European Union took 2%, with bank treasury accounts picking up 70%, asset and fund managers 16%, insurance 4%, public institutions 3% and private banks 7%.

The proceeds will be used to repay offshore bank borrowings and for general working capital.

On Thursday morning, the notes were quoted at 99¾ bid, par offered.

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