Bahrain launches sukuk, nixes conventional bonds; Turkcell mandates; Vrio prices notes

By Rebecca Melvin

New York, March 28 – The Kingdom of Bahrain launched a $1 billion 7½-year sukuk, or Islamic bond, on Wednesday but decided to forego the 12- and/or 30-year conventional bonds that were expected to price at the same time, according to market sources.

The new sukuk was launched to yield 6 7/8%, which was the tight end of guidance in the 7% area.

The fact that the conventional bonds were nixed was not overly surprising given that market volatility has cast a shadow of uncertainty over the whole market. But by all reports, Bahrain was expected to go ahead with the issuance this week in spite of market conditions and widening in its existing bonds after the new deals were announced last week.

“Clearly they got no real support for it,” a London-based trader said.

The planned dual or triple tranche deal followed fast on the heels of Bahrain’s $3 billion of notes in three tranches that priced in September. That deal included its $850 million 5¼% sukuk due 2025, a $1.25 billion 6¾% conventional bond due 2029 and a $900 million 7½% conventional bond due 2047. Final terms for those tranches came 25 basis points or more below talk.

For the current deal, it was expected that investors were generally bearish without stronger indication of Saudi fiscal support, a London-based market source said.

But the sovereign has funding needs of $7.5 billion in 2018, the source added, so it is possible the 12- and 30-year paper may be revisited later in the year.

Elsewhere, Turkish mobile phone operator Turkcell Iletisim Hizmetleri AS announced that it selected banks and scheduled a roadshow for a dollar-denominated benchmark of 10-year bonds.

BNP Paribas, HSBC and JPMorgan were chosen to arrange the series of fixed-income investor meetings in Europe and the United States starting April 3.

In Latin America, Vrio Corp., the Latin America-focused subsidiary of AT&T Inc., launched $1 billion of notes in two tranches despite some market uncertainty.

The $350 million of Vrio five-year notes launched to yield 6¼%, and the $650 million of 10-year notes launched to yield 7%.

Vrio is a wholly owned subsidiary of AT&T and owns and operates DirectTV Latin America’s South American and Caribbean assets.

Citigroup, Goldman Sachs & Co. LLC, JPMorgan and Morgan Stanley are bookrunners for the Rule 144A and Regulation S notes.

But there was no news on other deals on the calendar for Latin America including dollar-denominated notes for Gilex Holding Sarl which has a 94.7% stake in Colombia’s Banco GNB Sudameris, Barretos, Brazil-based food processor Minerva SA or Argentina’s Transportadora de Gas del Sur SA, which is considering an issue of notes of up to $500 million, or its equivalent in other currencies, in one or more classes.

The unstable market and conditions that make it difficult to get deals done at specific price targets were likely keeping issuers on the sidelines, a syndicate source away from the deals said on Wednesday.

“It’s a tough environment, stuff that has priced has not done as well as they hoped,” the source said, referring to InRetail Real Estate Corp., which priced on Tuesday $350 million of 5¾% notes due 2028 at par and Sigma Alimentos SA de CV’s $500 million 4 7/8% senior notes due 2028, which priced last Thursday at 99.336 for a yield of U.S. Treasuries plus 212.5 bps.

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