MENA calendar grows as Qatar taps banks for triple trancher; new Turkcell notes firmer

By Rebecca Melvin

New York, April 6 – After a smattering of new issues that priced in hard currencies this past week, the emerging markets is looking at a busier calendar and a pickup of new issuance next week, market sources said on Friday.

Market players were gearing up on busy upcoming week for the Central & Emerging Europe, Middle East and Africa region as yet another deal – this one for Qatar – landed on the calendar.

Qatar, which has been absent from the primary market amid an ongoing diplomatic dispute with its neighbors since last June, now follows Qatar-based corporate issuer, Mannai Corp., into the market with a dollar-denominated triple tranche offering of five-, 10- and 30-year notes.

Qatar’s bookrunners, Al Khaliji, Barclays, Credit Agricole, Credit Suisse, Deutsche Bank, Mizuho, QNB Bank and Standard Chartered, are arranging roadshow meetings in the United States and United Kingdom starting on Tuesday, according to one source. A Rule 144A and Regulation S sale will follow, subject to market conditions.

“It’s going to be a busy week,” a London-based syndicate source said.

In addition to Qatar and Mannai, Egypt is planning to price a two-tranche euro-denominated deal of eight- and 12-year notes; Oman Telecommunications Co. SAOG is planning to price two dollar tranches of five and 10 years; Dubai’s Damac Real Estate Development Ltd. is planning to price dollar five- and seven-year sukuk certificates; Noor Bank PJSC and Sharjah Islamic Bank are coming with five-year dollar benchmark sukuk; and KazMunayGas of Kahzakhstan is planning to price a dollar benchmark of seven-, 12- and/or 30-year notes.

Egypt is riding on the coattails of Ivory Coast and Senegal, which recently priced euro-denominated deals, a market source said. The success of those deals indicated that there are a lot of investors hungry for yield.

Egypt is a single B- credit, and while yield for a euro deal may translate into slightly less than for the equivalent in dollar-denominated paper, it is a sovereign and for investors focused on sovereign debt, it is going to appeal, a market source said.

Meanwhile, Turkcell Iletisim Hizmetleri AS’ newly priced 5.8% notes due 2028 were released for secondary dealings on Friday, and the lower- to medium-grade paper was seen firmer on the break after the $500 million deal priced at a discount of 97.779.

This past week’s largest deal was for Latin America’s Buenos Aires Province, which priced $1.49 billion equivalent of Argentine peso-denominated seven-year floating-rate notes on Thursday.

The notes are denominated in Argentine pesos but will be subscribed and payable in dollars.

“They priced a floating-rate niche product. But it’s good; it bodes well for next week. We have a couple of deals like Grupo Bimbo and Rioprevidencia, so it should be positive,” a New York-based market source said.

Mexico City-based bakery and food company Grupo Bimbo SAB de CV plans to price a dollar-denominated hybrid security that has been rated BB+ by S&P’s ratings agency, and that is a couple notches below the senior notes, one source noted.

The Rio de Janeiro public pension fund RioPrevidencia is planning a 10-year dollar-denominated note.

Meanwhile a pair of Latin America deals on the calendar since last week remained there. Speculating on why they have not priced, one source said the structure of Minerva SA as a perpetual senior unsecured bond is difficult and has not been done in Latin America since 2013.

“There is not that much of that type of paper outstanding. They could do a step up. It’s looking like they will have to go back to the market if they want to finish their tender. But I’m not sure what they want to do,” the New York-based source said.

Gilex Holding SARL, which owns most of Colombia’s Bank GNP Sudameris, may also be affected by uncertainty around Columbia’s upcoming presidential election, the source suggested.

“It’s been a wild ride in U.S. markets, and what really hurts is the uncertainty. It doesn’t provide the confidence for investors if they are heading into a bad market,” the source said, noting that higher yields and lower tightening is a new reality for new issuance.

On Friday, U.S. stocks plunged again and safe haven assets like U.S. Treasuries were higher. The Dow Jones industrial average closed down 572.46 points, or 2.3%, on the day to 23,932.76. But for the week the loss was more like 0.5% since the average had moved higher for three sessions.

The yield on the benchmark 10-year Treasury note was down 1.9% at 2.777%.

Meanwhile the tone of the euro market has been fairly strong and emerging market bond funds saw higher inflows for the first week of April, according to EPFR Global fund tracker data.

Emerging markets bonds have also sold off at various points this year, and current yields in combination with U.S. dollar weakness are attracting investor attention with the latest week’s retail commitments the third largest year to date, according to an EPFR note published late Thursday.

Local currency emerging market bond funds took in more than $1 billion for the first time in six weeks and emerging markets bond funds domiciled in Europe accounted for about three-quarters of the week’s total inflows, according to EPFR.

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