Sappi Papier prints bonds as risk appetite improves; Latin American issuers advance deals

By Christine Van Dusen

Atlanta, April 5 - Sappi Papier Holding GmbH sold notes as other issuers - including Argentina's Banco de Galicia y Buenos Aires and Brazil's Banco Votorantim SA and Companhia de Electricidade do Estado da Bahia - planned deals on a Tuesday that saw spreads tightening, risk appetite improving and buying activity continuing.

"Overall, spreads are doing well," a trader said.

Indeed, the JPMorgan Emerging Markets Bond Index Plus spread started the European session at Treasuries plus 254 basis points, about 4 bps tighter from the start of the week and 9 bps tighter since the previous week.

"Debt spreads continue to tighten, albeit in a gradual manor," according to a report from RBC Capital Markets.

Liquidity improves

Liquidity improved on Tuesday, said Nick Chamie, head of emerging markets research for RBC.

"There's more market movement," he said. "Risk appetite is improving too, but without a lot of conviction behind it.

"People have reduced exposures over the last two or three months, so I think they're forcing themselves back in," he said. "But given that there's still quite a bit of uncertainty out there in relation to all the different risk events - Japan, oil, European sovereign debt problems, the Middle East, increasingly hawkish statements from Fed officials - conviction is still low. But nonetheless they're still forcing themselves in and increasing their buying."

Sappi Papier prints notes

Sappi Papier Holding - the European subsidiary of a Johannesburg-based producer of coated fine paper - sold a two-tranche issue of euro- and dollar-denominated notes due 2018 and 2021 at par to yield 6 5/8%, a market source said.

The deal included $350 million notes due April 15, 2021, which priced at a spread of Treasuries plus 319 bps. The notes are non-callable for five years.

In the second tranche, Sappi sold €250 million notes due April 15, 2018 at a spread of 358 bps over Bunds. The notes are non-callable for four years and include an equity clawback for up to 35% at 106.625.

Citigroup, Credit Agricole, JPMorgan, KBC Bank, RBS and Unicredit were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used to redeem the company's outstanding 2012 notes and repay bank debt.

LatAm corporates plan deals

In other deal-related news, Argentina-based lender Banco de Galicia y Buenos Aires has mandated UBS and Deutsche Bank for up to $300 million of notes, a market source said.

The notes are expected to carry a tenor of up to seven years.

And Brazil-based lender Banco Votorantim whispered the planned add-on to its $750 million 5¼% senior notes due Feb. 11, 2016 at the Treasuries plus 270 bps area, a market source said.

BB Securities, BNP Paribas, Bradesco BBI, HSBC, RBS and Banco Votorantim are the bookrunners for the Rule 144A and Regulation S notes.

Proceeds will be used for general corporate purposes. The original issue priced Feb. 7 at 98.834 to yield 5.52%, or Treasuries plus 325 bps.

Also from Brazil, electricity company Companhia de Electricidade do Estado da Bahia (Coelba) mandated BB Securities, BNP Paribas and Itau for a roadshow starting Thursday, a market source said.

The marketing trip will begin in Zurich and Geneva and travel to London, New York and Boston before wrapping up on April 13 in Los Angeles.

Better buying seen

"It was another fairly constructive session, with a decent tone throughout the day," a trader said. "We saw better buyers for the most part. However I try and keep things light, especially at the front end of some of the credit curves."

As the market continues to see support and increased stability, investors will likely move out along the curve to pick up yield and spread, he said.

"We are already witnessing that on the Qtel International curve, where the 19s, 21s and 25s are finally catching a solid bid, whereas two weeks ago they were loveless," he said.

Also on Tuesday, Turkey's issuers opened slightly weaker, a trader said.

"We are still a better seller of Akbank's 2018s," he said. "There's been a moderate sell-off on the sovereign curve, but the corporates are holding in."

In general it was a fairly quiet session for Turkey. "We saw some last-minute small sales on banks and sovereigns at the longer end of the curve," he said.

IPIC sees support

The day also saw support for International Petroleum Investment Co.'s bonds. "The 2016 sterling notes have really caught a bid since Friday," he said. "Those notes closed at Gilts plus 214 bps, having priced at Gilts plus 244 bps. The 2021 euro notes closed at Gilts plus 254 bps after having priced at Gilts plus 276 bps."

Lebanon saw the return of some liquidity, especially on the 2017 bonds and other longer-dated paper.

Abu Dhabi's corporates, sovereigns and quasi-sovereigns were holding 1 to 2 bps tighter, he said, and Jordan's 2015 dollar notes were well supported. "Jordan has underperformed for a while now and we're finally seeing some interest in the Street."

Dubai's issuers had a quieter day. "The Dubai 20s are still holding a little above par bid side, and Dubai Water and Electricity Authority's 20s were trading a few times in the low 98s," the trader said.

Peripheral Europe struggles

Meanwhile, the euro zone's problems continued in the background.

In a survey of growth among European nations, service sector companies in countries like Germany and France grew at a faster-than-expected rate, according to the Markit Eurozone Services Purchasing Managers' index.

"The euro zone survey came in at 57.2 in March, up from its earlier flash estimate and its highest level since August 2007," said Gavan Nolan, an analyst with Markit, in a report.

But peripheral European countries didn't fare as well.

"As usual, the disparities between the various countries in the region were considerable," he said, "with ... peripheral nations acting as a drag."

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