Turkey, Kipco sell notes; Hungary eyed; Bank of Sharjah postpones; Sri Lanka plans notes

By Christine Van Dusen

Atlanta, Feb. 16 – Turkey priced a tap and Kuwait Projects Co. (Kipco) printed a new deal on a strong Thursday for emerging markets assets.

“It seems like there is not much that can derail the strong market sentiment at this moment,” a London-based analyst said. “EM credit is back on track, with the EMBI chasing the 300 basis points mark despite [Federal Reserve Chair Janet Yellen’s] attempt to prepare markets for a quicker pace in rate hikes, yesterday’s strong inflation print and generally assertive data.”

Investors were also keeping an eye on Hungary, where the central bank is saying the sovereign should reduce external vulnerability and not issue on the eurobond market.

“A former comment by central bank economists said that a ‘significant’ eurobond issuance would not provide any meaningful advantages for the increase in vulnerability, and therefore recommended forint financing or a small panda bond,” the analyst said. “The government had previously indicated €1 billion in issuance for this year subject to the market environment.”

Most credits from Central and Emerging Europe were “slightly better” on Thursday, “as core rates come back with demand from ETF accounts,” a London-based trader said.

In other trading, the rally in high-yield Asian sovereign bonds took a breather on Thursday on the news that Sri Lanka could issue up to $1.5 billion of notes in March.

Citigroup, Standard Chartered, HSBC and Deutsche Bank are the bookrunners for the deal.

Other details were not immediately available on Thursday.

Turkey prices tap

In its new deal, Turkey priced a $1 billion tap of its 6% notes due March 25, 2027 at 102.639 to yield 5.65%, or Treasuries plus 320.5 bps, according to a filing from the sovereign.

The notes were talked in the 5.85% area.

The original $2 billion issue priced in January at 98.858 to yield 6.15%, or Treasuries plus 375.7 bps.

Those notes were initially talked in the 6.2% area.

BNP Paribas, JPMorgan and MUFG Securities are the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general financing purposes.

“So some more issuance, but well received in this market at least, with the sovereign curve only a few bps off the tights,” a London-based trader said. “The 2027s now look cheap to the curve in secondary trading and we are seeing some local buyers there while trimming some long-end.”

The deal saw “very strong demand, and a book to match,” a syndicate source said. “I was surprised how well the 2027 was received back in January and its performance and this tap are evidence that, despite its problems, Turkey is still very much on the radar of investors to put cash to work.”

Kipco sells notes

Also on Thursday, Kuwait’s Kipco priced $500 million 4½% notes due Feb. 23, 2027 at par to yield 4½%, a syndicate source said.

Price talk was revised to 4¾% after initial talk of 4 7/8%.

Citigroup, HSBC, Kamco and JPMorgan were the bookrunners for the Regulation S deal.

Proceeds will be used to fund a tender offer for the issuer’s $500 million 4.8% notes due 2019 in order to extend the company’s debt maturity profile.

The issuer is a Kuwait City-based public investment holding company for a diverse group of businesses.

Bank of Sharjah delays

United Arab Emirates-based Bank of Sharjah has delayed pricing of a benchmark-sized issue of dollar-denominated notes due in five years until next week, a market source said.

The issuer is waiting until it has received approval from the central bank to release audited financial statements from 2016.

Bank ABC, Emirates NBD Capital, JPMorgan and National Bank of Abu Dhabi are the bookrunners for the Regulation S deal.

“We see fair value in the z-spread plus 190 bps to 195 bps area for the planned 2022s, but we think that the issuer has to pay a new issue premium of around 15 bps to 20 bps,” a London-based analyst said. “[The bank’s] fundamentals are mixed, with weak efficiency and profitability, low asset growth and deteriorating asset quality but also adequate loan loss coverage and strong capitalization. Our main concerns are the bank’s concentration risks while its substantial amount of overdrafts in its loan book raises some question marks.”

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