Greece's woes slow EM issuance, shake confidence; investors keep up demand for new paper

By Christine Van Dusen

Atlanta, May 10 - Emerging markets assets stayed fairly resilient on Tuesday, even as the news that Greece will likely require yet another round of debt restructuring quieted the primary market and left investors less optimistic about a global economic recovery.

"A session dominated by noise from Greece and its E.U. masters somehow resulted in risky assets rallying," said Gavan Nolan, an analyst with Markit, in a report. "Spreads were tighter on the news and didn't give back much of their gains after [Greece's] denial."

Said a London-based trader: "Dealer inventory felt moderate, and many EM credits closed out the day well supported."

Among them were corporate debt issues from Saudi Arabia and Abu Dhabi, as well as African names like Senegal, Ghana and Nigeria.

"We know that Greece will restructure, that global rates will go up and that at some point we will have another crisis," a market source said. "We also know right now that rates are still low, so buying EM is good."

But demand for paper continues to outpace supply. "This market needs more," the trader said.

Bradesco sells notes

Helping that cause was Brazil-based lender Banco Bradesco SA, which on Monday priced a $1.35 billion two-tranche issue of notes due 2014 and 2016, a market source said.

Bradesco BBI, Citigroup and Goldman Sachs were the bookrunners for the Rule 144A and Regulation S notes.

The deal included $500 million notes due May 16, 2016 that priced at 99.674 to yield Treasuries plus 235 basis points, matching price talk.

The second tranche totaled $850 million floating-rate notes due May 16, 2014, which also matched guidance by pricing at par to yield Libor plus 210 bps.

Proceeds will be used for general corporate purposes.

Banco Safra deal advances

In an upcoming deal from the Brazilian banking sector, Banco Safra SA whispered guidance for its planned issue of dollar-denominated notes due 2014 at the Treasuries plus mid-200 bps area, a market source said.

Barclays Capital, Banco Safra and UBS are the bookrunners for the Regulation S deal.

Also from Latin America, Colombia's Gruposura Finance set the size for its planned issue of notes at $300 million and the tenor at 10 years, a market source said.

Bank of America Merrill Lynch and JPMorgan are the bookrunners for the Rule 144A and Regulation S notes, which are guaranteed by investment company Grupo de Inversiones Suramericana SA (Gruposura).

The notes include a change-of-control put at 101%.

Proceeds will be used for general corporate purposes.

The deal is expected to price on Thursday.

Icici Bank plans bonds

In other deal-related news on Tuesday, India-based lender Icici Bank announced plans to issue between $500 million and $1 billion of notes by the end of May, a market source said.

Citigroup, Deutsche Bank, HSBC and RBS are the bookrunners for the deal.

And Nigeria-based lender Guaranty Trust Bank plc talked its planned issue of five-year dollar-denominated notes at 7½% to 7¾%, a market source said.

"That seems very attractive to us, at a 175-bps spread above their existing bond," a market source said.

Turkish corporates in demand

In trading, Turkey opened mostly unchanged and later saw good flow through the sovereign curve despite a weaker currency.

"The sovereign curve has tightened by 7 to 10 bps across the long end of the curve," the trader said.

On the corporate side, good demand was seen for electronic appliances manufacturer Vestel Electronik Sanayi Ve Ticaret AS' 2021 notes following the company's release of better-than-expected first-quarter earnings.

"We continue to be cautious on their operating outlook," a market source said. "However, Vestel reiterated they are planning to take out the $225 million bond maturing in 2012 with internally generated cash and bilateral bank loans. We continue to believe the instrument is a safe hold-to-maturity short-term paper."

Said a trader: "We continue to see better interest in short-dated risk, even in the more illiquid names such as Vestel."

Finansbank trades lower

Also from Turkey, loose bonds were seen from Finansbank AS, which on May 5 priced $500 million 5½% notes due 2016 at 99.384 to yield 5.643%.

The notes were seen at 96.875 bid, 97.375 offered on Tuesday.

"Finansbank is slowly drifting south," the trader said.

Said another market source: "Finansbank is down as endless negative Greece headlines distract from the underlying strong credit fundamentals."

The trader also noted some pockets of demand for the 2021s from Turkiye Garanti Bankasi AS (GarantiBank). The notes, which recently priced at 98.086, were seen Tuesday at 99.125 bid, 99.50 offered.

Mixed day for Middle East

Looking at the Middle East, Dubai saw little selling on Tuesday while bonds from corporates in Saudi Arabia and Abu Dhabi were well supported.

Bahrain was holding, the trader said, and Qatar's names were between 3 and 5 bps tighter.

"Qatar, Saudi and sukuks are all super solid," he said.

And the 2016 notes from Abu Dhabi's International Petroleum Investment Co. that priced in March at 99.379 were popular on Tuesday. Early in the session the notes were trading at 100.53 bid, 100.73 offered, and later they were seen at 100.62 bid, 100.87 offered.

Russia, Africa in focus

In other trading on Tuesday, Russia's Alfa Bank saw some good two-way demand across the curve, with better selling of the company's 2021 notes.

The notes, which priced at par on April 19, were trading early Tuesday at 101.625 bid, 102 offered and were later seen at 101.50 bid, 101.875 offered.

Buying interest was also seen for the Russian sovereign and quasi-sovereign space, as well as for Ukraine, a source said.

Meanwhile, issuers from Africa had good support on Tuesday, with the recent issue of notes due 2021 from Senegal trading at 102.75 bid, 103.25 offered. The bonds priced at 97.574.

"South Africa is amazing," a trader said. "Another wave of demand went through."

Meanwhile, bonds from Kazakhstan were lagging, in particular the recent notes from Kazkommertsbank (KKB) and BTA Bank.

"KKB is down a half-point," a market source said.

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