Cielo, AK Bars Bank price notes as risk sentiment suffers; EM bond fund inflows decline

By Christine Van Dusen

Atlanta, Nov. 9 - Brazil's Cielo SA/Cielo USA Inc. and Russia's AK Bars Bank OJSC printed bonds on a Friday that saw moderate volumes as emerging markets investors faced renewed concerns about Greece's aid and the United States' impending fiscal cliff.

Add to this the continued cleanup after Hurricane Sandy wreaked havoc on the Northeast, and many a New York-based trader was more than ready to head into the long holiday weekend.

"Expect the risk-off mode to continue," a trader said. "The embers of the euro zone once again are igniting."

Still, some emerging markets bonds felt well supported on Friday, particularly International Petroleum Investment Co.'s 2041s, a London-based trader said.

Dubai Electricity and Water Authority's 2020s were also trading well, about 30 basis points tighter on the month.

Saudi Electricity Co.'s 2022s, however, were lagging on Friday, he said. "It's 12 bps wider on the week and can't rally," he said.

In other news, inflows into emerging markets bond funds totaled $774 million for the week ended Nov. 7, according to a report from data tracker EPFR Global.

That's down from the previous week, which saw inflows of $1.08 billion.

"Investors were acting as if the worst is far from over," EPFR said in its report.

Flows were evenly divided between local and hard currency funds.

"Asia remains the preferred choice for regional investors, with China bond funds enjoying steady inflows since the beginning of the fourth quarter," the report said.

Cielo sells notes

For its new deal, Brazil's Cielo priced $875 million notes due 2022 to yield 3.8%, or Treasuries plus 225 bps, via BB Securities, Bradesco BBI and Goldman Sachs in a Rule 144A and Regulation S deal.

The notes are guaranteed by Cielo SA, a credit and debit card operator based in Barueri, Brazil and controlled by Banco do Brasil SA and Banco Bradesco SA.

"It will be interesting to see how this paper will perform versus bank paper - particularly Bradesco and Banco do Brasil - and other similarly rated, Brazilian consumer-based credits," a trader said.

AK Bars prices bonds

Friday also saw Russian lender AK Bars Bank price a $500 million issue of 8¾% notes due Nov. 19, 2015 at par to yield 8¾%, a market source said.

Credit Suisse and VTB Capital were the bookrunners for the Regulation S-only deal.

This followed the late-Thursday pricing of notes from Netherlands-based Credit Europe Bank NV, a lender that serves emerging Europe, China and the United Arab Emirates.

The company priced a $250 million issue of 8½% notes due Nov. 15, 2019 at par to yield 8½% with Goldman Sachs and Morgan Stanley in a Regulation S-only issue of lower tier 2 notes.

Lat Am bonds weakening

In trading, Latin American corporate bonds continued to see weakness and spreads widened on Friday, following Thursday's lackluster session, a New York-based trader said.

"Street flows are being dominated currently by Braskem and Odebrecht," he said. "Both are down about 2 points and finding some support there."

Meanwhile, the new issue of $1 billion 4 1/8% notes due Nov. 9, 2022 that Banco Santander Mexico SA priced at 98.183 to yield Treasuries plus 260 bps was seen Friday at about 100.80, the New York trader said.

QGOG notes trade up

Brazil-based QGOG Constellation SA's $700 million issue of 6¼% notes due Nov. 9, 2019 that priced at 98.612 to yield 6½% was trading Friday at 98¾ bid, 99¼ offered.

HSBC, Bank of America Merrill Lynch and Citigroup were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds from the offering will be used to repay short-term debt and for general corporate purposes.

QGOG is a Rio de Janeiro-based provider of off- and on-shore drilling in Brazil through subsidiary Queiroz Galvao Pleo e Gas SA.

Ajecorp, Sifco in focus

Another recent issue from Latin America was fairly active on Friday. The $150 million add-on to the existing 6½% notes due May 14, 2022 from Peruvian beverage company Ajecorp BV was quoted during the session at 109 bid, 1091/2.

The notes priced at 109.257 to yield 5¼% via Bank of America Merrill Lynch in a Rule 144A and Regulation S deal.

And one market source was whispering about Brazil-based automotive components manufacturer Sifco SA, which has been planning a $200 million issue of notes due May 2018 and recently talked them at the 12¾% area.

"It looks like the deal could get pulled," he said, "due to weak demand."

Citigroup, Goldman Sachs and Banco Pine are the bookrunners for the Rule 144A and Regulation S deal.

Ukraine bonds stabilizing

In trading from Ukraine, bonds were fairly stable, with some demand seen for the sovereign's 2017s and 2020s, said Svitlana Rusakova of Dragon Capital.

Corporates, particularly Mriya Agro Holdings and Metinvest, were under some pressure near the end of the week, she said.

"The market got wounded but is far from destroyed," she said. "With the global risk mood stabilizing we are back to waiting for IMF signs."

ADIB deal oversubscribed

The final book for Abu Dhabi Islamic Bank (ADIB)'s $1 billion issue of 6 3/8% perpetual Islamic bonds was about $15 billion from 350 investors, a market source said.

The notes priced this week at par to yield 6 3/8% after being talked at a yield in the 7% area.

Abu Dhabi Islamic Bank, HSBC, Morgan Stanley, National Bank of Abu Dhabi and Standard Chartered Bank were the bookrunners for the Regulation S-only sukuk.

About 38% of the orders came from Asia 32% from the Middle East, 26% from Europe and 4% from the offshore US.

Private banks picked up 60%, asset and fund managers 26%, banks 11% and others 3%.

In trading, the notes were very active on Friday morning, trading between 101.30 and 102 before closing at 102 on the bid side, a trader said.

QNB draws orders

Also oversubscribed was Qatar National Bank SAQ's $1 billion 2 1/8% notes due Feb. 14, 2018 that priced this week at 99.293 to yield mid-swaps plus 145 bps.

Deutsche Bank, HSBC, Mitsubishi UFJ Securities, QNB Capital and Standard Chartered were the bookrunners for the Regulation S-only deal.

The deal drew $3.4 billion orders from more than 200 accounts, a market source said.

About 46% came from the Middle East, 31% from Europe, 22% from Asia and 1% from the United States.

Banks accounted for 44%, funds 31%, central banks and agencies 15%, private banks 7% and insurers 3%.

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