BankMuscat, IDBI, Digicel price notes; Cyprus anxiety remains; EM spreads narrow slightly

By Christine Van Dusen

Atlanta, March 19 - Oman's BankMuscat, India's IDBI Bank Ltd. and Jamaica's Digicel Ltd. priced notes as spreads tightened a touch on a mixed Tuesday that saw emerging markets investors worrying about the financial turmoil in Cyprus.

The mood was somewhat better than on Monday, following the European Union's announcement that its levy on deposits in Cyprus - set up as a way to recapitalize the trouble sovereign's banking industry - would be a one-time event and that small depositors could be exempt.

"The scope for contagion to other periphery markets is limited," according to a report from Barclays.

The Markit iTraxx SovX index spread was seen Tuesday at Treasuries plus 174.5 basis points, tighter by 1 bp. The corporate index, seen at 214 bps on Monday, also narrowed by 1 bp.

"The Cyprus bailout dominated headlines yesterday and this morning there are indications that the national Parliament will change the terms to protect smaller depositors," a London-based analyst said. "Russia has reacted angrily to the levy and there are suggestions it will not continue with financial aid to the country."

Russian corporate bonds opened mostly unchanged on Tuesday.

"There are platform sellers of VTB 2018, 2020 and 2022," the analyst said.

Two-way activity was noted for Russia-based OAO Sberbank.

From Turkey's corporate sector, buyers emerged for names like Vakifbank and GarantiBank while selling was reported for Isbank's 2017s.

And sellers were also seen for the recent issue of 8 7/8% notes due 2018 from JSC State Savings Bank of Ukraine (Oschadbank).

Meanwhile, Ukraine-focused UkrLandFarming Plc, Turkey's Coca-Cola Icecek AS and Turkey's Asya Katilim Bankasi AS (Bank Asya) advanced deals.

"The backdrop continues to look mixed at best," a trader said. "Supply ticks along. And while inflated order books see pricing right at the tightest possible point of the initial guidance, paper is still sought after and over time generally doing OK."

Perpetuals improve

In trading from the Middle East, International Petroleum Investment Co.'s 2020s and 2022s widened by 15 bps and 17 bps, respectively, a trader said.

"Perpetuals had a better day today," he said.

Indeed, Abu Dhabi Islamic Bank's recent issue of perpetual notes moved slightly higher on Tuesday, printing at 104.25 before closing at 104 bid, 104 3/8 offered.

"Dubai Islamic Bank is seeing nibbling near the par to 100.125 level," a London trader said, noting that the notes closed Tuesday at par bid, 100¼ offered.

Middle East in focus

At the same time, Dubai's curve "struggled," a trader said.

"On the week the curve is 10 bps to 20 bps wider, with the 2021 outperforming," he said.

Dubai Electricity and Water Authority's 2020 bonds were 5 bps wider on the day, or 25 bps wider on the week at 122 offered.

"Nicely of the highs, this on, having got their supply out of the way with a five-year sukuk that holds near par," a trader said. "Still a fairly well liked credit."

Bahrain was steady in trading and Emirates airline saw better buyers for its 2016s and 2023s while better sellers emerged for the company's 2025s.

"Active session so far, with some good liquidity around," he said.

Qatar notes widen

Qatar's 2042 bonds were 28 bps wider on the month, at 119 mid.

"It has been an active morning in the Middle East and North Africa, with good liquidity and prices around," the analyst said. "Still quite technical on many bonds."

Some bids were seen for Qtel International's 2021s and 2025s.

"Being the older bonds, they are much better placed," she said.

BankMuscat sells notes

In its new deal, Oman-based lender BankMuscat priced a $500 million issue of 2½% notes due March 26, 2018 at 99.302 to yield mid-swaps plus 170 bps.

The notes were talked in the mid-swaps plus 187.5 bps area.

"That lured in the demand," a trader said.

Citigroup, Credit Agricole CIB, Deutsche Bank, HSBC, National Bank of Abu Dhabi and Standard Chartered Bank were the bookrunners for the Regulation S deal.

"This is a scarce bond from a country and credit that does not issue very frequently at all," he said.

More sellers than buyers

BankMuscat's new notes first traded at 99¼ bid, 99½ offered before moving to 99.30 bid, 99.55 offered. Later in Tuesday's session, the notes were quoted at 99.37 bid, 99.47 offered.

"Some profit-takers emerged, taking the bond back down to 99.30 bid side," the trader said. "Nine sellers for every one buyer here. Let's see how it opens in the morning with more local banks around. I'd suspect many have been waiting years for a decent-rated Omani bank to park on their books."

The new notes closed Tuesday at 99.30 bid, 99 3/8 offered.

"Gulf region bank paper has been very well sought after so far this year as a defensive place to invest," he said.

IDBI does deal

In another new deal, India's IDBI Bank sold $500 million 3¾% notes due Jan. 25, 2019 at 99.786 to yield 3.792%, or Treasuries plus 300 bps, a market source said.

HSBC and Standard Chartered Bank were the bookrunners for the Regulation S deal.

And Jamaica-based wireless communications company Digicel priced an upsized $300 million add-on to its 6% senior notes due April 15, 2021 at par to yield 5.998%.

The notes - via left bookrunner Citigroup and joint bookrunners JPMorgan, Credit Suisse, Barclays and Deutsche Bank - priced on top of talk.

The quick-to-market add-on was upsized from $250 million.

UkrLandFarming gives guidance

Tuesday also saw Ukraine-focused agricultural producer UkrLandFarming set initial guidance in the high-10% area for its planned issue of benchmark-sized bonds, a market source said.

Citigroup, Deutsche Bank and Sberbank CIB are the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used to repay outstanding debt and for financing capital expenditures.

"For the structure, covenant-light package and country-risk, this guidance is on the tight end," the London analyst said.

Coca-Cola Icecek taps banks

In other news, Turkey-based bottler Coca-Cola Icecek has mandated RBS and Citigroup for a roadshow to market an issue of eurobonds, a market source said.

The roadshow will begin Wednesday and travel through Europe and the United States.

And Turkey's Bank Asya has set the tenor at 10 years for a dollar-denominated issue of Islamic bonds, according to a company announcement.

The Regulation S notes will be issued by Asya Sukuk Co. Ltd. and will be non-callable for five years.

BofA Merrill Lynch, ENBD Capital, HSBC and National Bank of Abu Dhabi are the bookrunners for the deal.

A roadshow began on March 14.

Paul A. Harris contributed to this article.

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