Mubadala's two-tranche offering ahead as EM assets weaken; Uniflora Prima sets guidance

By Christine Van Dusen

Atlanta, April 12 - Abu Dhabi-based Mubadala Development Co. PJSC set price talk on a long-awaited deal on a Tuesday that saw emerging markets assets suffer from some weakness amid renewed concerns about the Japanese nuclear crisis and the global economy.

"After a weak session in Asia as Japan raises the nuke crisis severity to match Chernobyl and the IMF cuts its growth forecast for the U.S. and Japan, we are opening weaker this morning," a market source said.

During the morning the JPMorgan Emerging Markets Bond Index Plus spread moved 15 basis points wider on the increase in volatility among riskier assets. By the close of the session, the EMBI+ spread was 7 bps wider, with Argentina wider by 13 bps, Ukraine by 23 bps and Venezuela by 15 bps.

"It's been a moderately active day, with spreads struggling into the close, but we're not seeing anything in the way of full-scale client selling pressure," a London-based trader said.

Tinkoff could suffer

The current market climate could prove challenging for some of the issues in the pipeline, a London-based market source said.

"This current state of weakness will be an interesting test for some of the more speculative issuance planned," he said.

He pointed to the dollar notes planned by Moscow-based credit card and consumer lending company CJSC Tinkoff Credit Systems Bank, which are expected to price next week via Citigroup and Goldman Sachs in a Regulation S transaction.

"Better quality names like Promsvyazbank should still be fine," he said.

Mubadala talks offering

But market-watchers are primarily awaiting one deal: the two-tranche issue of notes from Abu Dhabi-based Mubadala Development. The government-owned investment vehicle set price talk for a five-year tranche at the Treasuries plus 185 bps area and 10-year notes at the Treasuries plus 210 bps area, a market source said.

"Mubadala is a solid credit and is always one of the first credits to buy on any panic in the market," the London trader said. "A new bond with a yield pick-up to the existing 2014s - trading 8.5 points above par - should do well subject to pricing being OK and size not getting too silly."

Barclays Capital, HSBC, National Bank of Abu Dhabi, Societe Generale and Standard Chartered are the bookrunners for the deal, which is being marketed this week during a roadshow in Asia and the United States.

"This deal will be a good test of sentiment in the region," a market source said.

Said the London-based market source: "The deal looks about 10 bps cheap."

The five-year is expected to offer a 4.06% yield while the 10-year should yield 5.59%, a market source said.

Turkey on 'rollercoaster'

In early trading on Tuesday, Turkey was seen 5 bps wider "despite good selling of the 10- to 15-year sector of the curve," the London-based market source said.

Said the London trader: "Turkey is very slightly overperforming some of her peers. We traded some Yuksel Insaat AS 2015s and are left better sellers of it."

Overall, bonds from Turkey "had a rollercoaster session with two-way flow in normally illiquid corporate names," the London-based market source said.

Looking to Ukraine and Georgia, better selling was noted for all of the corporates. Georgia's new 2021 bonds, which came to market April 7 at 98.233, were trading Tuesday at 99.50 bid, 99.80 offered.

And Belarus' 2018s were down just a half-point to 90.

Russia, Kazakhstan see supply

Given the current state of oil prices, issues from Russia and Kazakhstan were seeing the most supply, and names like Vnesheconombank and VTB Bank were seen about a half-point weaker.

Meanwhile, the Middle East and Africa were "holding in relatively well despite some selling," the London-based market source said.

And while Abu Dhabi was slightly wider in the morning, Dubai's sovereign and corporate bonds started the day with some Street sellers and later saw Street buyers.

"The market started off a little nervous this morning with some dealers testing the depth of the Dubai and Dubai Water and Electricity Authority bids in the Street," a market source said. "However, the credits are holding in, at least price-wise, very well."

Dubai's DP World was solid on Tuesday, with the 2017 dollar notes closing at 101.37 bid, 101.75 offered, about 35 bps tighter on the week.

TDIC sees buyers

Buyers were also seen for Abu Dhabi's Tourism Development & Investment Co. The 2014 notes were seen Tuesday morning at 109.62 bid, 110.12 offered before trading later in the European session at 109.75 bid, 110.25 offered.

"Qatar banks are very solid," the London-based trader said.

But National Bank of Abu Dhabi's 2015s were lagging at 102.10 bid, 102.30 offered.

"In fact, we're selling Abu Dhabi Islamic Bank's 2015s at 100.75 versus buying National Bank of Abu Dhabi's 2015s at 102.25 and picking up coupon, yield, rating and z-spread," the trader said.

Also from the Middle East, Kuwait Projects Co. Holding (Kipco) was placed on review for a ratings downgrade from Moody's Investors Service as the company's 2011 notes matured.

"That leaves just the 2016s and 2020s from Kipco in the market," the London trader said. "We saw some regional demand on the 20s."

Cimento Tupi taps bookrunner

In deal-related news on Tuesday, Cimento Tupi SA, a Brazil-based producer, distributor and seller of cement and concrete, mandated Merrill Lynch as the bookrunner for a $150 million offering of 10-year notes, a market source said.

The Rule 144A and Regulation S notes are non-callable for five years and include a change-of-control put at 101%.

A roadshow will take place from April 12 to April 19.

Also from Brazil, lender Banco Cruzeiro do Sul SA is planning a dollar-denominated issue of three-year bonds, a market source said.

Deutsche Bank and UBS are the bookrunners for the deal.

And Indonesia-based cocoa producer PT Uniflora Prima set price talk for its dollar-denominated offering of five-year notes at the 13¾% area, a market source said.

ING is the bookrunner for the Rule 144A and Regulation S notes.

Proceeds will be used to make-whole Davomas' 2014 and 2011 notes, for the tender of Davomas shares, to fund interest reserve accounts and for capital expenditures.

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