Mexican sovereign, Cemex come to market; Ukraine fighting tapers; some spreads tighten

By Christine Van Dusen

Atlanta, Feb. 26 – Mexico and Mexico’s Cemex SAB de CV sold notes on Thursday as fighting decreased in Ukraine and spreads tightened for Russia and bonds from Central and emerging Europe.

Fighting in Ukraine has tapered off, with the sovereign’s army reporting no cease-fire violations overnight, a London-based analyst said.

“The focus remains on possible further sanctions on Russia,” he said. “If the relative peace we have seen in the last 48 hours continues, that threat of sanctions may subside. But our impression is that the rhetoric, particularly out of the United States, has become more aggressive that before. However, we still think the European Union will find it difficult to agree on further sanctions.”

Russian credit default swaps spreads opened 5 basis points tighter on Thursday, supported by better oil prices, a London-based trader said.

Credit default swaps spreads for Turkey were unchanged on Thursday while Turkiye Is Bankasi AS (Isbank) rebounded from recent rumors that the lender was going to be seized by authorities.

Bonds from Central and emerging Europe were strong again on Thursday morning, tightening by about 2 bps, following Wednesday’s risk-on session and outperformance from Croatia ahead of its roadshow, he said.

Looking to the Middle East, spreads were mixed and generally wider on the rates move, the analyst said.

“The new First Gulf Bank saw small underperformance yesterday, but we’ve already seen some buying interest this morning,” he said. “High yield names are finally seeing some support ... with investors attracted to the yields on offer, following underperformance earlier this year.”

African sovereigns narrow

From Africa, sovereigns opened tighter on Thursday after being well-bid on Wednesday, a trader said.

“Eskom Holdings is trading well, roughly 20 bps tighter on the week, with Standard & Poor’s yesterday saying in an interview they were comfortable with South Africa’s support package for the utility company,” he said.

Perobras, Vale see sellers

Brazil-based Petroleo Brasileiro SA and Vale SA saw better sellers and at least 10 bps of widening on Thursday, a New York-based trader said.

One large account was chasing the better high-grade names from Chile, as well as non-oil and industrial names from Brazil.

And Brazil-based Odebrecht SA was holding on to the gains of the past week, he said.

Asian bonds soften

Asian bonds softened on Thursday but closed unchanged to a couple of basis points tighter on healthy demand from real-money accounts, a trader said.

“The China oil complex is a touch tighter, with Cnooc 2024 trading up,” he said.

Chinese property companies closed unchanged to ¼ point higher, he said.

“In Korea, we’ve seen good demand in the short end, with Korea Development Bank 2019s up,” he said.

India unchanged

Most names from India closed unchanged, with financial companies well-bid, the trader said.

“But 10-year corporates are starting to feel heavy with profit takers,” he said.

Among high-yield sovereigns, Indonesia outperformed, with shorts getting squeezed, he said.

“The long end closed ¾ point to 1 point higher, the belly ½ point higher,” he said. “Philippines’ curve is generally unchanged, with the long end ¼ point higher as local banks remained better sellers.”

Cemex sells two tranches

In its new deal, Mexico-based Cemex priced a two-tranche issue of $750 million notes due in 2025 and €550 million 4 3/8% notes due in 2023, a market source said.

The $750 million 6 1/8% notes due May 5, 2025 priced at 99.98, following talk of 6 5/8% to 6¾%.

The €550 million notes due in March of 2023 carried a coupon of 4 3/8%, following talk in the 4 7/8% area.

BBVA, BofA Merrill Lynch, Citigroup, Credit Agricole CIB and HSBC were the active bookrunners for the Rule 144A and Regulation S deal. Banca IMI, BNP Paribas, ING, JPMorgan and Santander were the passive bookrunners.

Cemex sees demand

The proceeds from the new Cemex deal will be used to fund the redemption or purchase of the company’s floating-rate dollar notes due in September and the 9% notes due January 2018, as well as the 9¼% notes due May 2020 that were issued by Cemex Espana SA, according to a company filing.

Any remaining proceeds will be used for general corporate purposes and other indebtedness.

When Cemex first announced its new deal on Thursday, dealers were hitting bids in the belly of the existing curve, a New York-based trader said.

But as the session went on, demand increased, he said.

Mexico prints two-part deal

Mexico priced €3 billion of notes due March 6, 2024 and 2045, a market source said.

The €1.25 billion 1 5/8% notes due 2024 priced at 99.486 to yield 1.687%, or mid-swaps plus 110 bps, tighter than talk in the 120 bps area.

The €1.25 billion 3% notes due 2045 priced at 98.199 to yield 3.093%, or mid-swaps plus 190 bps. The notes were talked at a spread in the 195 bps area.

Barclays, Deutsche Bank and Santander were the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general governmental purposes.

Country Garden gives guidance

China’s Country Garden Holdings Co. Ltd. set initial talk at 7 7/8% for a five-year issue of notes, a market source said.

JPMorgan, Goldman Sachs, HSBC, Deutsche Bank and CLSA are the bookrunners for the Regulation S deal.

The proceeds will be used to refinance the company’s 2018 notes and for other existing debt, as well as for related fees and expenses.

Country Garden is a Foshan, China-based real estate developer focused on large-scale residential communities.

© 2015 Prospect News.
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