Qatar prices whopping $4 billion deal, investors snap up bonds; Gazprom sells loan notes

By Christine Van Dusen

Atlanta, July 11 - Emerging markets investors spent most of Wednesday buzzing about the new $4 billion deal from Qatar, which priced tighter than guidance and was very active in trading, with particular interest in the 10-year tranche.

This big deal - along with notes from Russia's OJSC Gazprom - came against a backdrop of continued uncertainty about the European economic crisis, which has depressed investor sentiment and suppressed risk appetite.

"The lack of clarity from E.U. finance ministers at meetings this week, as well as mixed data globally, have weighed on investor sentiment," according to a report from Barclays Capital.

While risk assets have mostly rebounded from May's market downturn, the bonds have become more expensive, Barclays said.

"We continue to recommend a neutral allocation to risk, recognizing that market risks are offset by historically high risk premia," the report said.

Still, emerging markets assets managed to trade fairly well on Wednesday, a London-based trader said.

"It was a tad nervous on the back of stocks last night, but it has a pretty good ability to shrug off anything at the moment," he said.

In Qatar's new deal, issued by funding vehicle SoQ Sukuk A QSC, the sovereign priced a $4 billion issue of Islamic bonds due July 18, 2018 and 2023 at par.

The deal included $2 billion 2.099% notes due 2018 that yielded 2.099%, or mid-swaps plus 115 basis points. The notes were talked at mid-swaps plus 120 bps to 125 bps.

The second tranche consisting of $2 billion 3.241% notes due 2023 yielded 3.241%, or mid-swaps plus 155 bps. The notes were talked at mid-swaps plus 160 bps to 165 bps.

Notes catch a bid

In advance of Qatar's pricing, the sovereign's long-dated bonds were catching a bid, a trader said.

"The duration bid remains, and there is the realization that there is not going to be more supply outside the five-year and 10-year sukuks pricing today," he said. "And most paper is locked away. I still maintain that Qatar should do a 40-, 50-, 60-year issue, but this apparently isn't in the cards."

After the deal priced, the 2018 notes were seen at 100.20 bid, 100.25 offered, while the 2023 notes were trading at 100.87 bid, 101.06 offered.

Barwa Bank, Deutsche Bank, HSBC, QInvest and Standard Chartered Bank were the bookrunners for the Regulation S deal.

Qatar notes 'hugely active'

As the day went on, emerging markets investors were busily buying and selling the new Qatar notes.

"Hugely active," the trader said. "Very fast markets. The Street loves the 2023s."

The 2018 notes traded at 100.10 bid, 100.20 offered, then closed at 100.07 bid, 100.17 offered. The 2023 notes were seen at 100.93 bid, 101.13 offered before closing at 100.93 bid, 101.06 offered.

"The Street might already got itself hedged with a load of sellers of the 2018s and a load of buyers of the 2023s," he said. "The long one holds very well at the moment. The morning should be interesting as locals' accounts top up allocations."

Gazprom prices bonds

In another new deal, Russia's Gazprom priced €750 million 3.759% loan participation notes due 2017 at par, according to a company release.

The notes were issued by Gaz Capital SA under the company's euro medium-term note program.

Credit Agricole CIB, Gazprombank and JPMorgan were joint bookrunners and lead managers.

Proceeds from the offering will be used to finance a loan to Gazprom, and proceeds from the loan will be used for general corporate purposes.

Prior to the deal's pricing, the notes were "trading nicely in the gray," a trader said. "Getting deals out of the way before the summer and Olympics really set in."

Long-dated notes 'in vogue'

The Markit iTraxx SovX index spread was at about 284 bps over Treasuries on Wednesday morning.

"Long-dated bonds are still very much in vogue," a trader said.

For example, the 2041 notes from Abu Dhabi-based International Petroleum Investment Co. (IPIC) were trading early Wednesday with a 122 handle. By the afternoon in Europe, the notes were quoted at a 123 handle.

"That's a stunning run and is dragging up the belly of the curve, the 2022s and 2020s especially," he said. "IPIC just goes up. The 2022s are 50 bps better on the month. I imagine if U.S. Treasuries go back to 1.6%, there will be another 10 bps of tightening, easily, maybe more."

Middle East in focus

Dolphin Energy's 2021 notes were tighter by 7 bps and Qatar's 2022 bonds were up at 111.

Abu Dhabi National Energy Co.'s 2021 bonds and 2036 bonds were "virtually bid-only," a trader said. "And even little DP World's 2037s are bid just a shade under par. Slightly better offers in the Dubai space, but it's still holding pretty well."

Saudi Electricity Co.'s 2022 bonds were trading at 107 on the bid side, which is 40 bps tighter on the month.

"Dar al Arkan's 2012s being due on Monday - that's a big event," a trader said.

Emaar tightens guidance

Dubai-based developer Emaar Properties set price talk at 6½% to 6 5/8% for its planned $500 million issue of seven-year Islamic bonds, a market source said.

The deal was initially talked at 6¾%.

Al Hilal Bank, Barwa Bank, Dubai Islamic Bank, Emirates NBD Capital, HSBC, Noor Islamic Bank and Standard Chartered Bank are the bookrunners for the Regulation S deal.

The notes are expected to price on Thursday.

South Africa bonds firm

In other trading on Wednesday, bonds from South Africa were very firm, a trader said.

The sovereign's five-year credit default swaps were quoted at 150 bid, 155 offered.

African Export-Import Bank also had a solid day, with its 2014 bonds quoted at 110.50 bid, 111.50 offered and its 2016 bonds at 105.25 bid, 106.25 offered.

Also on Wednesday, market-watchers were talking about Tunisia, which is expected to price a $400 million to $450 million issue of seven-year notes this week, a market source said.

Bank of America Merrill Lynch and Natixis are the bookrunners for the deal.

Codelco does deal

Late on Tuesday, Chile-based copper mining company Corporacion Nacional del Cobre de Chile (Codelco) priced a two-tranche issue of $2 billion notes due 2022 and 2042.

The deal included $1.25 billion 3% notes due July 17, 2022 at 98.663 to yield 3.157%, or Treasuries plus 165 bps. The second tranche, consisting of $750 million 4¼% notes due July 17, 2042, priced at 97.547 to yield 4.398%, or Treasuries plus 180 bps.

HSBC and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

Aleesia Forni contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.