Chinese corporates issue notes; Iraq, Ukraine news dampens investor sentiment; EM bonds widen

By Christine Van Dusen

Atlanta, June 16 – China’s Bank of Communications and China’s Far East Horizon Ltd. sold notes on Monday as emerging markets assets widened on Monday amid worries about the crisis in Iraq and the gas dispute between Russia and Ukraine.

“Choppy day,” a trader said.

Russia’s gas company, Gazprom, says Ukraine has not paid its bills and will soon only receive the gas that has already been paid for, a London-based analyst said.

In response, bonds from Gazprom traded down on Monday morning, she said.

Turkey’s bonds also suffered on Monday, with the crisis in Iraq – where Sunni extremists seized control of the city of Tal Afar – hurting sentiment.

“Overall, [emerging markets] feels weaker this morning, with Russian banks 15 basis points wider on average,” she said. “But selling has, overall, been fairly modest, with select buying by real money.”

In other trading, the new issue of 3½% notes due in 2024 that Morocco priced last week at mid-swaps plus 215 bps moved slightly wider on Monday.

“Fairly defensive tone throughout the day, with the situation in Iraq and Ukraine being quoted as the reason, but I also think the recent supply is just weighing on the market a little,” a London-based trader said. “These factors, combined with the Street just being defensive, saw spreads, for the most part, wider.”

In deal-related news on Monday, Russia’s OAO Sberbank was looking at printing notes while three issuers – Slovenia’s Petrol dd Ljubljana, Kenya and United Arab Emirates-based National Bank of Ras Al Khaimah (RAKbank) – gave guidance.

Emaar nearly flat

The recent issue of Islamic bonds from Dubai’s Emaar Malls Group – 4.564% 10-year notes that priced at par – opened at 100½ bid, 100 5/8 offered and closed the European session at par bid, 100¼ offered.

“I’d seen decent buying and volume going through late last week at 100 5/8,” the trader said.

Dubai Islamic Bank, Emirates NBD Capital, First Gulf Bank, Mashreq, Morgan Stanley and National Bank of Abu Dhabi were the bookrunners for the Regulation S sukuk.

Etisalat widens

Abu Dhabi-based Etisalat’s dual-currency $4.3 billion-equivalent offering of euro- and dollar-denominated notes received some attention in trading on Monday, a trader said.

The deal included $500 million of 2 3/8% five-year bonds that priced at 99.691 to yield mid-swaps plus 67.5 bps.

The second tranche, $500 million of 3½% 10-year bonds, sold at 99.059 to yield mid-swaps plus 87.5 bps.

A €1.2 billion tranche of 1¾% notes due 2021 sold at 99.051 to yield 80 bps over mid-swaps.

And a €1.2 billion 2¾% bond due 2026 at 98.328 to yield 110 bps over mid-swaps.

“I’d call these 2 bps to 4 bps wider, with the Street still happy picking up the long-dated 2026s at 99¼ bid, 99.30,” the trader said.

Deutsche Bank, Goldman Sachs, HSBC and RBS were the bookrunners.

Damac suffers

The issue of 4.97% notes due in 2019 from Dubai’s Damac Real Estate Development Ltd. “took a beating” in trading on Monday, a trader said.

The notes came to the market at par via Barclays, Citigroup and Deutsche Bank in a Regulation S deal.

“Trading below 98 today – fresh lows,” he said.

Middle East in focus

Bonds from Bahrain were heavy in trading on Monday, a trader said, particularly the sovereign’s 2022s and 2023s.

“They are the best part of 17 bps to 20 bps wider on the week,” he said.

And long-dated notes from Saudi Electricity Co. and Qatar saw sellers on Monday.

Deals ahead

The London trader was keeping his eye out for an uptick in new supply from the Middle East, including benchmark-sized and dollar-denominated notes from Commercial Bank of Qatar.

BofA Merrill Lynch, HSBC and Morgan Stanley are the bookrunners for the Regulation S deal.

He was also on the lookout for Abu Dhabi-based Al Hilal Bank’s upcoming issue of dollar-denominated and benchmark-sized perpetual notes, which are being marketed on a roadshow.

HSBC, Emirates NBD, Standard Chartered Bank, Citigroup, National Bank of Abu Dhabi and Al Hilal Bank are the bookrunners for Regulation S issue of Islamic notes.

The roadshow ends June 23.

Chinese bank prints bonds

In its new deal, China’s Bank of Communications priced a three-tranche issue of RMB 2 billion notes due on June 23 of 2017, 2019 and 2021, a market source said.

The deal included RMB 1 billion 3.45% notes due 2017 that priced at par to yield 3.45% and RMB 500 million 3.85% notes due 2019 that priced at par to yield 3.85%.

The third tranche totaled RMB 500 million 4.15% notes due 2021 that priced at par to yield 4.15%.

Bank of Communications and HSBC were the bookrunners for the deal.

Bank of Communications is a Shanghai-based financial institution.

Far East does deal

China’s Far East Horizon priced $200 million 5.55% perpetual notes at par to yield 5.55%, a market source said.

HSBC, ANZ, DBS Bank and Standard Chartered Bank were the bookrunners for the deal.

Far East Horizon is a financial leasing unit of Sinochem Group, which is a Hong Kong-based business conglomerate with interests in agriculture, energy, chemicals, real estate and finance.

Petrol company sets talk

Slovenia-based oil and energy company Petrol dd Ljubljana gave initial guidance in the 3¾% area for its upcoming issue of euro-denominated notes due in five years, a market source said.

JPMorgan is the bookrunner for the Regulation S-only deal.

Kenya gives guidance

Kenya set initial talk for its upcoming issue of dollar-denominated notes due in five and 10 years, a market source said.

The five-year notes were talked in the low-6% area. The 10-year notes were talked in the low-7% area.

Barclays, JPMorgan, Standard Bank and QNB Capital are the bookrunners for the Rule 144A and Regulation S deal.

Talk from RAKBank

Dubai’s RAKbank set initial talk in the mid-swaps plus 170 bps area for its upcoming issue of benchmark-sized notes due in five years, a market source said.

National Bank of Abu Dhabi and Standard Chartered Bank are the bookrunners for the deal, which is being marketed during a roadshow.

Sberbank seeks issuance

Russia’s OAO Sberbank is looking to issue about €1 billion of five-year notes, a market source said.

No other details were immediately available on Monday.

Sberbank is a Moscow-based lender.

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