Codelco, Albania, others print notes as investors stay cautious; Argentina a hot topic

By Christine Van Dusen

Atlanta, Oct. 28 - New issuance in the emerging markets kept a steady pace on Thursday - with deals from Hong Kong's Chong Hing Bank, Abu Dhabi Islamic Bank, Chile's Codelco and Albania - as investors awaited definitive action from the Federal Reserve and remained focused on the possibility that Argentina could become more market-friendly.

The tone, overall, was "very, very choppy," a New York-based market source said. "There's been some selling but also buying with a good underlying bid today."

Volumes were "moderate," according to a New York-based trader. "Volumes remain the heaviest in Argentine bonds."

But for the most part, the market was in wait-and-see mode, said Cameron Brandt, senior analyst with data tracker EPFR Global.

"Everyone's taking a bit of a breather while they wait to see what the Fed will actually do and how next week's elections here will actually play out," he said.

Indeed, inflows into emerging market bond funds totaled $710 million for the week ended Oct. 27, down from the previous week's $1.4 billion.

"There's just a degree of uncertainty," Brandt said.

The JPMorgan Emerging Markets Bond Index Plus ended the day down 2 basis points, with Argentina tighter by 8 bps and Venezuela by 16 bps.

Argentina stays in focus

Argentina remained on the market's mind on Thursday after the recent death of former president Nestor Kirchner led many investors to wonder whether the sovereign might switch gears in the next election and institute financial policies that are more orthodox.

"Yesterday was a huge day," the New York-based market source said. "Argentina is pretty firm."

The question raised by Nestor Kirchner's death is whether it will fracture president Cristina Fernandez Kirchner's power base, decreasing the chance that she will run for re-election and leaving room for market-friendlier candidates to enter the race.

On Thursday it seemed that the market had already decided the answer would be yes. The Argentina 2015s - which were trading at 92½ before the announcement - were at about 96 at mid-afternoon on Thursday.

"The dollar discounts had traded at 89½ prior to the headline and traded today as high as 941/2," a Connecticut-based trader said. "Argentina had good momentum anyway."

But it may be a bit too soon to react so strongly to the Kirchner news, sources said, as it's possible Cristina Kirchner may run again and policies could remain much as they are.

"I think there is a danger that she will run for re-election and really open up the pocketbook and do some damage to the local budget by overspending for votes, so I think there is a danger created by his void," the Connecticut trader said. "We will have to see how this plays out."

Market chokes on PDVSA

Overall, Latin America wasn't much affected by the Argentina news.

State-owned copper company Corporacion Nacional del Cobre de Chile (Codelco) priced $1 billion 3¾% notes due Nov. 4, 2020 at 98.239 to yield 3.965%, or Treasuries plus 130 bps, a market source said.

Deutsche Bank and HSBC were the bookrunners for the Rule 144A and Regulation S transaction.

Proceeds will be used for general corporate purposes and for copper projects.

Meanwhile, investors were still coping with the $3 billion in seven-year paper from state-owned oil company Petroleos de Venezuela SA (PDVSA), which priced earlier this month at par.

"It's been very tough to digest the new supply," a market source said. "One of the first trades was 71 or 711/2. Now it's about 70, down about a point and a half. That's after a small bounce this morning when it looked like equities would open higher."

PDVSA has seen "very few buyers on the periphery absorbing any of the supply," he said.

Albania does deal

Other recent new issues, overall, have been "trading at or below where the new deals came," the Connecticut-based trader said.

He pointed to the new €300 million 7½% bonds due Nov. 4, 2015 from Albania, which priced Thursday at 99.496 via Deutsche Bank and JPMorgan in a Regulation S-only transaction.

"That's not being particularly well received," he said. "Some stuff is not trading as strongly as it was earlier in the month."

The New York-based market source noted the same trend. "The general consensus is that these issues are not doing as well as you would think they should. If the price is right, then OK. But in general it's a little soft."

Trading below their reoffer prices on Thursday were the $1 billion 6.7% notes due 2017 from Russia-based mining company Severstal that priced Oct. 14 at par and the $1 billion 6.551% notes due 2020 from Russia-based lender VTB Bank that priced Oct. 6 at par.

"Guys are becoming more selective," the Connecticut trader said. "There's not a full arsenal of new money. The market is getting a bit saturated for new issues, and people are becoming very cautious."

Chong Hing prints notes

"The number of new issues has slowed," a source said.

That's particularly true for Asia, the New York-based source said. "Asia used to be flooded with new issues. They're going through some indigestion there."

But that didn't stop Hong Kong-based lender Chong Hing Bank from coming to market on Thursday with $225 million 6% subordinated tier 2 notes due Nov. 4, 2020. The notes priced at 99.488 to yield 6.069%, or Treasuries plus 337.5 bps.

Goldman Sachs, HSBC and UBS were the bookrunners for the Regulation S-only deal, which includes a regulatory switch in which the subordinated notes will turn senior on or after Jan. 1, 2013 if regulations change.

Proceeds will be used to strengthen the bank's capital base and fund operations.

Also from Asia, East Asian undersea cable network operator Pacnet set final price guidance for its $300 million offering of five-year senior secured notes at the 9 3/8% area, according to a market source.

Credit Suisse, Barclays, DBS and Standard Chartered are the bookrunners for the Rule 144A and Regulation S deal, which is non-callable for five years.

Proceeds will be used for general corporate purposes and to repay debt, as well as to fund capital expenditures and to fund a dividend.

Abu Dhabi Islamic Bank prices

Abu Dhabi Islamic Bank priced a $750 million sukuk issue of 3.745% notes due Nov. 4, 2015 at par to yield Treasuries plus 248.9 bps, a market source said.

Barclays Capital, HSBC and Standard Chartered were the bookrunners for the Regulation S deal, which was whispered to yield mid-swaps plus the low 200 bps before launching at mid-swaps plus 225 bps.

In other deal news on Thursday, Russia-based oil and energy company OAO Lukoil set price talk for its planned issue of up to $1 billion in senior notes due 2020 at the 6¼% area, a market source said.

RBS and Barclays Capital are the bookrunners for the Rule 144A and Regulation S deal, which was marketed on a roadshow from Monday to Thursday.

Proceeds will be used for general corporate purposes and for the repayment of existing debt.

And Indonesia's Aerospace Satellite Corp. Holding BV, a special purpose vehicle of satellite pay television company PT MNC Sky Vision, mandated HSBC and Standard Chartered as joint bookrunners for a dollar-denominated offering of senior secured guaranteed notes due 2015, a market source said.

The Rule 144A and Regulation S notes - guaranteed by PT MNC Sky Vision, PT Mediacitra Indostar and Aerospace Satellite Corp. BV - will be non-callable for three years.

The company plans to use $95 million of proceeds to finance the acquisition of satellite transponders and $71 million to upstream cash to main shareholder PT Global Mediacom Tbk. The rest will be used to fund issue-related expenses, according to a Standard & Poor's report.

A roadshow will begin Friday and travel through Hong Kong, Singapore, London and the United States.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.