Abu Dhabi Commercial prints big deal; Sberbank sells notes; spreads widen on Italy worries

By Christine Van Dusen

Atlanta, Feb. 26 - Abu Dhabi Commercial Bank (ADCB) priced a $1.5 billion issue of notes in two tranches on Tuesday, drawing as much as $7 billion in orders but receiving a tepid response in the secondary market as uncertainty about the Italian election moved spreads wider.

"ADCB priced their deals, and they will be free to trade in the morning," a London-based trader said. "However, post-allocations the bonds feel poorly placed."

Also printing notes on Tuesday was Russia's OAO Sberbank.

The Markit iTraxx SovX index spread moved 3 basis points wider on Tuesday to 180 bps over Treasuries while the corporate index moved out 6 bps to 235 bps over Treasuries.

"The Middle East and North Africa are obviously wider at the open, as we fail to keep up with the U.S. Treasury move," a London-based analyst said.

Higher-beta names fared best on Tuesday, with bonds from Emaar Properties and Dar al Arkan Holdings seeing demand. And the recent issue of perpetual notes from Abu Dhabi Islamic Bank, which priced at par to yield 6 3/8%, traded at 103.85 bid, 104.35 offered.

"Dubai Electricity and Water Authority's books should close tomorrow, I'm told, with a low 3% on the five-year sukuk," the London trader said. "I realize the appeal of lower dollar-priced assets and yes, they can trade rich to the curve. But I think if this deal comes, there will be some interesting bonds available in the secondary market."

Several other issuers advanced deals on Tuesday, including China's Bank of Communications, China's Citic Telecom International Holdings Ltd. and Turkey's Arcelik AS.

New issue from Sberbank

In its new deal, Russia-based lender Sberbank priced a 550 million Turkish lira issue of 7.4% notes due 2018 at par to yield 7.4%, a market source said.

The notes were talked at a yield in the 7½% area.

HSBC, JPMorgan and Sberbank CIB were the bookrunners for the Regulation S deal.

ADCB sells bonds

In its new deal, Abu Dhabi's ADCB priced a two-tranche issue of $1.5 billion notes due 2018 and 2023 in a Regulation S deal via financing vehicle ADCB Finance (Cayman) Ltd., a market source said.

The deal included $750 million 2½% notes due 2018 (expected ratings: /A/A+) that priced at 99.636 to yield 2.578%, or mid-swaps plus 165 bps.

The notes priced tighter than talk, set at the mid-swaps plus 180 bps area.

The second tranche consisted of $750 million 4½% notes due 2023 that priced at 99.127 to yield 4.610%, or mid-swaps plus 265 bps.

The notes were talked at a spread in the high-200 bps area.

Abu Dhabi Commercial Bank, Barclays, ING, JPMorgan, National Bank of Abu Dhabi and RBS were the bookrunners.

ADCB notes close down

Prior to pricing, the ADCB's joint books were reportedly larger than $6 billion, a London-based market source said. And in trading in the gray market, the five-year notes were up 10 cents while the 10-year notes were up 35 cents.

"Probably 8½ sellers out of every 10 inquiries this afternoon, once allocations came out on these bonds," the London-based trader said. "If anything, it perhaps feels like the 10-year is slightly better placed than the five-year."

Given the broader market picture, there were a lot of loose bonds near the end of Tuesday's European session, he said.

"Of course the great hope is that locals come into tomorrow to pick up some paper," he said. "However, from where I sit, these bonds - especially the five-year - were poorly placed, tightly priced and in the wrong hands."

The five-year notes closed at 99½ bid, 99.70 offered while the 10-year notes finished the session at 99 1/8 bid, 99 3/8 offered.

America Movil prices notes

This new deal followed Monday's pricing by Mexico-based telecommunications company America Movil SAB de CV of a Ps. 7.5 billion increase of its 6.45% notes due 2022.

The notes came to the market at 105.129 to yield 5.76%, according to a company filing.

BBVA, Citigroup, Credit Suisse, Deutsche Bank, HSBC and Morgan Stanley were the bookrunners for the Securities and Exchange Commission-registered transaction.

The existing size of the issue was Ps. 15 billion.

Chinese issuers set talk

China's Bank of Communications set price talk at the Treasuries plus 195 bps area for its planned issue of 10-year dollar notes.

Bank of Communications, BOCOM International, HSBC, Morgan Stanley, Standard Chartered Bank and UBS are the bookrunners for the Regulation S deal.

Proceeds will be used for general corporate purposes.

And China's Citic Telecom gave guidance in the 6% area for its upcoming issue of dollar notes due in 12 years, a market source said.

Deutsche Bank, Standard Chartered Bank and UBS are the bookrunners for the Regulation S deal.

The proceeds will be used to finance acquisitions.

Talk from KHFC

Also on Tuesday, Korea Housing Finance Corp. set price talk at the Treasuries plus 100 bps to 105 bps area for a $500 million issue of covered bonds due 2018, a syndicate source said.

This is KHFC's third cross-border covered bond offering.

Nomura Securities is the bookrunner. Citigroup Global Markets and Standard Chartered Bank are joint lead managers for the Rule 144A and Regulation S securities.

The housing finance company is based in Seoul, South Korea.

Arcelik plans to issue

In other deal-related news, Turkey-based household appliances manufacturer Arcelik is planning to issue up to $1 billion of eurobonds, the London-based analyst said.

"Potential bond issue would diversify its capital structure, extend debt maturity profile and enhance liquidity profile," she said. "We believe that, depending on deal size and liquidity, it will be a welcome edition to Turkey's corporate universe."

The company does face operating risks due to the cyclical and seasonal nature of its business, she said.

"Financial risks are driven by cyclical earnings and fierce competition in the market, which has led to cost-cutting and restructuring measures across the industry," she said.

Cristal Cody contributed to this article.

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