EM bonds rally; AES Panama taps market; O’Hara sends out proxy; Oman bank joins calendar

By Christine Van Dusen

Atlanta, June 18 – Though many bonds from Europe and Asia rallied on Thursday morning as investors adjusted to the continuing turmoil in Greece, issuance was scarce, with just AES Panama SRL bringing a new deal to the primary market.

“European sovereign debt rallied with the exception of Greece, although peripheral debt spreads have widened versus bunds,” according to a report from Barclays Research.

Banks from China were standouts, a London-based trader said.

“China banks, which have been very strong throughout the weakness, rallied to new tights,” he said. “Bank of China’s 2024s traded up at 230 basis points, 6 bps tighter.”

Bonds from Korea closed the Asian session unchanged while India’s bonds moved 1 bp to 3 bps tighter, he said.

“Malaysia closed 5 bps tighter,” he said.

Also from Asia, China Shanshui Cement Group Ltd. saw Standard & Poor’s downgrade its rating by four notches to CCC with a negative outlook.

“The decision was triggered by the liquidity risk as a result of the company being hit with numerous problems after its majority shareholder was put into receivership,” according to a report from Schildershoven Finance BV. “Shanshui’s 2016 [option adjusted spread] of 910 bps is slightly above average for B Asian issuers.”

From Turkey, bank paper has seen buyers so far this week, a London-based trader said.

“Given the political uncertainty, post-election, it’s amazing how well-bid bank paper continues to be,” he said.

In deal-related news, National Bank of Oman SAOG is looking to issue up to $500 million of perpetual notes, a market source said.

Citigroup, Credit Agricole, National Bank of Abu Dhabi and Societe Generale CIB are the bookrunners for the transaction.

Pacific Rubiales in focus

Latin America-focused Pacific Rubiales Corp. was once again in the news, this time after the O’Hara Administration and other creditors opposed to the takeover from Mexico’s Alfa SAB de CV and Harbour Energy Ltd. sent a proxy circular and letter to Pacific Rubiales’ shareholders.

“We think the odds of a deal getting done with a successful vote in early July are 40%,” a trader said. “With O’Hara opposing, the company needs a ‘yes’ vote from 46% out of the remaining 60%, which seems like a tall task with a scattered retail investor base.”

In response, Pacific Rubiales’ long-end bonds were as much as 8 points off their highs, but only about 7 points above the level seen before the deal was announced in May.

“So risk-reward is still skewed to the upside,” he said. “Let the games begin.”

Said another trader: “The Pacific Rubiales curve moves lower as the dissident proxy from O’Hara gets digested, stirs up the pot and the market starts to maybe get a little more concerned about Alfa’s ability to grab the necessary quorum.”

Rosneft ‘cautious’ about PDVSA

Russia’s Rosneft OAO is “being more cautious” about engaging in new projects with Venezuela’s PDVSA, Schildershoven said in its report.

“According to some sources, Rosneft will provide a $5 billion loan in exchange for the larger stake in its joint venture with PDVSA and the ability to sell the gas from its newly planned joint-project abroad, with the latter being the main hurdle currently,” the report said. “PDVSA 2017 is trading in distressed territory, with it close to 5,000 bps.”

Indonesia sees profit-takers

Taking another look at Asian bonds, flows for Indonesia’s long end were heavy and price action was volatile for the 2045s, a trader said.

“Plenty of profit-takers in the Philippines and Indonesia space, post the rally during Asia time,” he said. “Philippines [bonds] are more resilient.”

Corporates and financial bonds were quieter on Thursday, he said.

AES Panama prints notes

In its new deal, AES Panama priced $300 million 6% notes due in 2022 at par to yield 6%, a market source said.

The notes were talked at a yield in the low-to-mid-6% area.

Deutsche Bank and Banco General were the bookrunners for the Rule 144A and Regulation S deal.

AES Panama is a subsidiary of global power company AES Corp.

© 2015 Prospect News.
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