Banco BMG prices deal as risk aversion wanes; spreads tighten; Georgia's notes see demand

By Christine Van Dusen

Atlanta, April 8 - Brazil's Banco BMG SA sold notes on Friday - and issuers like Hong Kong's BYD (H.K.), South Korea's Hyundai Steel Co. Ltd., Philippines' Megaworld Corp. and Brazil-based Banco Pine SA advanced deals - as risk appetite for emerging markets debt remained intact and spreads continued to tighten.

The JPMorgan Emerging Markets Bond Index Plus spread started the day 4 basis points narrower, at Treasuries plus 244 bps.

"Spreads are benefiting from the weakness in the U.S. Treasury market," a trader said.

Said a London-based market source: "EM has a healthy glow again today."

This positive sentiment has stemmed, in part, from the market's resilience in the face of the Japan disaster, the turmoil in the Middle East and continuing economic crisis in the euro zone, an emerging markets strategist said.

"We're all quite impressed with the way the market rebounded after all of that," he said. "We've seen a nice recovery."

Banco BMG sells notes

In its new deal, Brazil-based lender Banco BMG sold $300 million 8% notes due April 15, 2018 at 98.839 to yield 8¼%, a market source said.

Barclays Capital, BCP Securities, Bradesco BBI, BTG and Morgan Stanley were the bookrunners for the Rule 144A and Regulation S notes, which will amortize in year five with an average life of six years.

This brings the year-to-date total of corporate issuance to $73.5 billion, a market source said. Another $109 billion of corporate issuance is forecast to take place by the end of the year.

"So that means, all told, we'll have nearly $200 billion of corporate issuance this year, at least," he said. "There's been $28 billion of sovereigns issued. I think that trend will probably continue."

In 2010, there was a total of $204 billion of corporate issuance, he said.

"Prior to that, the highest year was 2007, with $152 billion of corporate issuance," he said. "But bear in mind, all the corporates that issue pay coupons, and those coupons get recycled back into the corporate market. It's sort of a self-feeding cycle. The market is going to grow unless we see defaults increase, but those are moving in the opposite direction."

BYD, Hyundai Steel plan deals

In other deal-related news, Hong Kong-based BYD (H.K.) - a subsidiary of automobile, handset component and rechargeable battery manufacturer BYD Co. Ltd. - is planning an issue of notes via bookrunner UBS, according to a company filing.

Proceeds from the Regulation S transaction will be used for business development and expansion and for general financing purposes.

Also from Asia, South Korea-based steel producer Hyundai Steel plans to issue senior dollar-denominated notes, a market source said. Proceeds will be used for refinancing.

Banco Pine, Megaworld eyed

Brazil-based lender Banco Pine has mandated BTG Pactual, JPMorgan and Santander for a roadshow in Europe and the United States beginning April 12, a market source said.

The marketing trip will begin in Geneva and Zurich and then travel to London before concluding on April 14 in New York and Boston.

A Rule 144A and Regulation S offering of notes is expected to follow.

And Philippines-based real estate company Megaworld set price talk for its $200 million issue of seven-year notes at the 6 7/8% area, a market source said.

UBS is the bookrunner for the Regulation S notes, which include a change-of-control put at 101%.

Proceeds will be used for refinancing, capital expenditures, working capital and general corporate purposes.

Georgia trades up

In trading, the recent new issue of $500 million 6 7/8% notes due 2021 from Georgia - which priced Thursday at 98.233 to yield 7 1/8% - was seen trading just above par on Thursday.

"Despite tightening the deal to 7 1/8%, it's up 1¾ points to yield z-curve plus 340 bps," the London-based market source said.

Turkey started the day roughly unchanged, with some trades seen for business conglomerate Calik Holding and electronics manufacturer Vestel. Vestel was in the news for reporting better-than-expected earnings.

"We've also seen some very light activity on the banks, and we are left slightly better buyers of Calik," the trader said.

Though Turkish banks widened on the back of the news that GarantiBank would soon come to market, the lenders' bonds firmed up again on Friday.

Middle East banks in focus

Looking at the Middle East, banks were "still pretty illiquid," the trader said. "We have traded Abu Dhabi Commercial Bank and Doha Bank. I still think Doha Bank looks interesting versus peer-group paper. But Qatar banks are different beasts."

The Qatar sovereign was tracking U.S. Treasuries on Friday.

"While I am from the camp that a name like Qatar should trade independently of the U.S. Treasury market, the market is not there yet," he said. "Hence, for the past two sessions the market has felt happy to sit on the offer and let go of paper, given this spread move and given the way the government market has been trading."

MENA active

The trader also noted some nibbles on Dubai names, as well as some demand for Tunisia's paper. And the notes from International Petroleum Investment Co. finished the week 20 bps to 25 bps tighter.

"That's pretty much in line with the move on [Abu Dhabi's Mubadala Development Co. PJSC]'s 2014s and 2019s ahead of their probable dollar offering next week," he said. "Watch price talk on the Mubadala deal next week."

In other trading, Nigeria's 2021 dollar notes were 50 bps tighter on the week. "The market is dismissing any election tension or strife," a market source said.

The notes closed Friday at 103.12 bid, 103.87 offered.

From Russia, one corporate issuer - Gazprombank - stood out from the rest. "They're doing the best this week as the yield compression continues," the source said.

And Belarus' 2018 notes were seen consolidating at the 91 level.

Looking to Latin America, Peru has made a bounce back, the strategist said. "Higher-beta names like Argentina and Ukraine are not doing too well but that seems to be made up for by the upside on other credits."

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