Hainan, Kexim, Brasil Telecom, Banco de Credito del Peru price notes on weaker day for EM

By Christine Van Dusen

Atlanta, Sept. 8 - China's Hainan Airlines Co. Ltd., Seoul-based Export-Import Bank of Korea (Kexim), Brasil Telecom SA and Banco de Credito del Peru SA sold notes on Thursday as emerging markets issuers began to tiptoe back to the market.

Debt remained somewhat firm but faced weakness and failed to see the spread tightening of the previous day.

"Appetite for risk waned and EM assets struggled ahead of U.S. president [Barack] Obama's key fiscal and jobs speech to Congress Thursday evening," according to a report from RBC Capital Markets.

Overnight, the JPMorgan Emerging Markets Bond Index Plus spread tightened 10 basis points to Treasuries plus 336 bps, with Venezuela a notable 27 bps tighter, then ended the day on Thursday wider by 3 bps with most sovereigns 2 bps to 7 bps wider.

"The few opening cash bond levels are showing the market firm. The Middle East and North Africa are particularly strong," a trader said. "It's still a tricky market with more and more bonds added to the list that are very tricky to source and virtually impossible to short."

Local demand remained, he said. But overall, the markets were thin.

"As usual, a busy morning followed by a lackluster afternoon," he said. "Spreads are still interesting on a lot of paper; it's just the cash prices putting many off."

Said another trader: "Volumes are still low, but aside from the Ukraine corporates, it's all firm."

Against this backdrop, several issuers made strides toward pricing new notes, including Brazil's Ceagro Agricola Ltda., Colombia's Banco de Bogota, India's Axis Bank and Taiwan's Advanced Semiconductor Engineering.

"It's interesting to note that, despite all the volatility in high-grade credit, new issues are getting done," a trader said.

Hainan, Kexim print bonds

In its new deal, China-based airline Hainan Airlines sold RMB 1 billion 6% notes due Sept. 16, 2014 at par, a market source said.

The notes came in line with price guidance, which was set at the 6% area.

Deutsche Bank, JPMorgan and Wing Lung Bank were the bookrunners for the Regulation S notes.

The notes include a change-of-control put at 101%.

And Kexim priced $1 billion 4 3/8% notes due Sept. 15, 2021 at 99.456 to yield 4.443%, or Treasuries plus 245 bps, a market source said.

The notes came in at the lower end of talk, which was set at the Treasuries plus 245 bps to 250 bps area.

Bank of America Merrill Lynch, Credit Suisse, Daiwa, Goldman Sachs, HSBC and JPMorgan were the bookrunners for the Securities and Exchange Commission-registered deal.

Proceeds would be used for general operations, including the extension of foreign currency loans and the repayment of maturing debt.

Brasil Telecom sells notes

From Latin America, Brasil Telecom sold R$1.1 billion 9¾% notes due Sept. 15, 2016 at 99.516 to yield 9 7/8%, a market source said.

The notes priced below talk, which was set at the 10% area.

Bank of America Merrill Lynch, Citigroup, Deutsche Bank, Itau and Morgan Stanley were the bookrunners for the Rule 144A and Regulation S deal.

And Banco de Credito del Peru sold $350 million notes due Sept. 16, 2026 at par to yield 6 7/8%, a market source said.

Bank of America Merrill Lynch and Morgan Stanley were the bookrunners for the Rule 144A and Regulation S deal.

The notes are non-callable for 10 years.

Chile does deal

These new deals followed the late-Wednesday pricing of the Republic of Chile's two-tranche issue of notes due 2020 and 2021 via bookrunners Deutsche Bank and HSBC, a market source said.

The deal included $1 billion 3¼% notes due Sept. 14, 2021 that priced at 99.131 to yield Treasuries plus 130 bps. The notes were talked at the Treasuries plus 135 bps area.

The second tranche was a CLP 162.05 billion add-on to the sovereign's 5½% notes due Aug. 5, 2020, which came to the market at 108.018 to yield 4.4%. Price talk was set at the 4½% area.

Proceeds from the Securities and Exchange Commission-registered deal will be used for general governmental purposes.

Chile 10-year notes trade up

The notes from Chile were among the few from Latin America that were trading actively on Thursday morning, a New York-based trader said.

The 10-year notes were seen at 99½ early in the session, he said.

Otherwise, "we could be looking at a slow, light day throughout as the markets," he said. "We saw Latin American credit go out last night hanging on dearly to the decent strength it showed throughout the session, but today it looks wider by at least 5 bps and skittish at best."

Bids pulled back about a quarter-point, and levels on high-beta paper were few and far between, he said.

Ceagro Agricola mulls notes

In other news from Latin America, Brazil-based agricultural importer and exporter Ceagro Agricola is considering an international issue of bonds for 2012, a market source said.

No other details were immediately available on Thursday.

And Colombia's Banco de Bogota is planning an issue of $1 billion notes that is expected to price at the beginning of October, a market source said.

Banco de Bogota is a lender based in Bogota, Colombia.

"There remains a sprinkling of new issues," a trader said.

Axis Bank ahead

India-based lender Axis Bank is planning an issue of benchmark-sized global bonds by the end of the first quarter of 2012, a market source said.

No other details were immediately available on Thursday.

And Taiwan's Advanced Semiconductor Engineering set price talk for its planned RMB 650 million issue of five-year notes at 4 1/8% to 4¼%, a market source said.

Citigroup is the bookrunner for the Regulation S-only notes, which include a change-of-control put at 101%.

Advanced Semiconductor Engineering is based in Kaohsiung, Taiwan.

BTA jumps higher

In trading, the biggest mover on Thursday morning was Kazakhstan's BTA Bank, which jumped 3 points. And National Bank of Abu Dhabi, Abu Dhabi Commercial Bank, Commercial Bank of Qatar and Sharjah Islamic Bank were all well sought after, he said.

"Some front end bonds are very tough to source," he said.

Also from the Middle East, Lebanon's 2022 notes were seen at 99.90 bid, 100.40 offered after pricing at 99.195 on July 28. "It felt like some 2022s came out yesterday, but they were pretty easily taken down in the market," he said.

Qatar solid, Kipco in demand

Qatar was solid, particularly on the long end, and Ras al Khaimah was illiquid but well supported.

"There's paper around for Abu Dhabi National Energy Co.'s 2012s, 2013s and 2014s versus limited paper around on the 2016s," the trader said. "Kipco's 2016s are well sought after and were trading around the 110.50 to 110.65 level this morning."

Looking to Africa, the 2016 notes from Cairo-based African Export-Import Bank (Afrexim) opened Thursday at 100.05 bid, 100.45 offered after pricing at par on July 20. Later the notes were holding just above par.

"It seems there are a few bonds around on Nigeria," he said. "Egypt paper is trading well, with buyers on the 2020s. Morocco is the same story, with buyers of the 2017s and sellers of the 2020s."

Strong day for Turkish banks

Turkey was a bit wider as sovereigns took a hit on the long end during the morning, the London trader said. "But we are still pretty much unchanged from yesterday's closes," he said.

By afternoon, demand was soaring for Turkish banks.

"There's staggering demand for Turkish banks," he said, noting better buyers of Garanti Bankasi AS' 2021s and sellers of Yapi Kredi. "The overall global mood may be sour, but the Turkish sector is ending the day strong with a bid-wave in the afternoon. Bank equities and euro bonds saw staggering demand in the afternoon on bets that the central bank is going to reduce reserves."

Akbank's 2018s were a resulting outperformer, he said.

"It's good to see that the laggard banks are trying to catch up with the sovereigns' move in the last couple of weeks," he said. "However, as a result of this decent move, we might see some profit-taking around these levels in the coming days."

From Russia, better buying was seen of Gazprom's 2018s and selling of KazMunaiGaz' 2021s.

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