Korea Development Bank, China's Tingyi print bonds; EM investors in 'glass half-full mood'

By Christine Van Dusen

Atlanta, June 13 - Korea Development Bank and China's Tingyi Holding Corp. priced notes on a Wednesday that saw emerging markets assets maintain their resiliency, even as the euro zone debt drama spread from Spain to Italy.

Market watchers may have been worried that the European Union will not be able to rescue the banks in both countries, but that did not stop investors from embracing emerging markets debt.

"Given we are just three trading sessions away from a Greek vote that could have a major impact on the way the euro zone debacle plays out, the level of ambivalence is impressive," a London-based trader said. "Now this can either mean that more risk premium is priced in than is recognized, or a confidence that if Greece gets ugly, Germany will finally capitulate and start mutualizing debt."

In the morning, the Markit iTraxx SovX index spread moved back below Treasuries plus 320 basis points.

"[Emerging markets] investors are happy to put money to work rather than remain underweight," he said. "With this glass half-full mood, it's very hard to fight it."

Said another trader, "It's getting basically pointless to follow the euro or Spain or Italy. The bottom line is, when the world is for sale, EM prices are marked lower. When the opposite holds true, these bonds rally. When the market is stable, these bonds rally."

Jafza bonds get support

Bonds from Dubai-based Jebel Ali Free Zone (Jafza), which priced late Tuesday, were popular in trading on Wednesday, a trader said.

The operator of an industrial free-trade zone sold $650 million 7% notes due June 19, 2019 at par to yield 7%, or Treasuries plus 588.9 bps.

Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Citigroup, Dubai Islamic Bank, Emirates NBD, National Bank of Abu Dhabi and Standard Chartered were the bookrunners for the Regulation S deal.

"Despite some concerns about over-leverage, rating and value, the bond has started its life on the front foot, last trading up at 101," the trader said during the European morning.

The notes closed Wednesday at 101.375 bid, 101.625 offered, near the high trade of the day.

"Many people passed on the deal, but the fact of the matter is the technicals rule the roost in this part of the world, and at the moment they are proving very supportive," he said. "The yield was appealing. There remains sukuk money looking for a home, and also some looking away from the usual five-year bank sukuks."

Dubai names get a boost

Jafza gave a big boost to other names from Dubai, a trader said.

The sovereign's 2020 bonds were trading at 110 bid, 110.75 offered while its 2017 bonds were seen at 103 bid, 103.75 offered on Wednesday.

Dubai Water and Electricity Authority lagged a little bit. The 2020 bonds were trading Wednesday at 106.25 bid, 107 offered.

"Their 2020s look OK versus the Dubai government's 2020s," he said. "DPWorld is 10 bps better.

Also from the Middle East, Qatar names remained rock solid. "They're 5 bps tighter again and most names are 10 bps to 15 bps tighter on the week," a trader said.

Bahrain's 2020 bonds traded a few times above the 99 level.

"They're unchanged on the month now," he said.

"The main focus is on Dubai rather than Abu Dhabi, although Abu Dhabi National Energy Co.'s long end is active, and also 10 bps tighter."

IPIC 'quiet'

Meanwhile, International Petroleum Investment Co.'s bonds were not particularly active on Wednesday after the company released its quarterly earnings.

"IPIC, for a change, is very quiet today," a trader said.

The company's 2015 notes, which traded Tuesday at 103 bid, 103.75 offered, closed Wednesday unchanged. IPIC's 2016 notes were trading at 109 bid, 109.75 offered on Wednesday after trading Tuesday at 109 bid, 109.50 offered.

Also underperforming on Wednesday was Aldar Properties, which is 50 bps wider on the month. Kuwait's Kipco is also wider on the month.

"Lebanon is lagging its peer group and at the moment is very slugging across the curve," he said.

Russia still sees demand

In other trading on Wednesday, Russia's bonds remained in demand.

"Russia has totally dislocated from oil prices since June, illustrating how EM demand is driven entirely by external factors," the London trader said.

Russia's Gazprom came out with mixed results from its first quarter, but that did little to dent retail investor interest.

"Also, Kazakhstan's BTA Bank is popping its head back above the parapet, with new of an early presentation of a restructuring proposal to the steering committee," the London trader said. "Not many bids now on their 2018 bonds."

Korea Development sells notes

In its new deal, Korea Development Bank priced RMB 1 billion 3.3% notes due 2015 at par, according to a syndicate source.

Barclays Capital, HSBC and KDB Asia were the bookrunners for the Regulation S-only notes.

The Seoul-based lender recently priced a two-tranche issue of notes due 2015 and 2017 via bookrunner Daiwa. The deal included 323.9 million Turkish lira of 8.35% notes due June 18, 2015 that priced at par to yield 8.35%. The second tranche consisted of R$45.5 million 7.02% notes due June 21, 2017 that also priced at par.

Korea Development Bank is expected to issue more renminbi notes with tenors of two and five years.

Tingyi does deal

Tianjin, China-based food and beverage company Tingyi Holding priced a $500 million issue of 3 7/8% notes due June 20, 2017 at 99.573 to yield 3.97%, or Treasuries plus 325 bps, a market source said.

The notes were talked at the Treasuries plus 330 bps area.

Barclays Capital and Deutsche Bank were the bookrunners for the Regulation S-only notes.

Proceeds will be used to finance capital expenditures relating to the company's alliance with PepsiCo., to repay loans and for working capital and other general corporate purposes.

Chexim prints bonds

Export-Import Bank of China (Chexim) priced a RMB 2 billion issue of notes due in 2017 and 2027 on Tuesday.

The deal included RMB 1 billion 3.35% notes due June 18, 2017 that priced at par to yield 3.35%. The notes were talked at 3.35% to 3.4%. The second tranche - RMB 1 billion of notes due June 18, 2027 - carried a 4.15% coupon and also priced at par.

Bank of China, Bank of Communications, BNP Paribas, HSBC, ICBC and RBS were the bookrunners for the Regulation S deal.

Also from Asia, electricity generator and supplier Korea East-West Power Co. Ltd. has mandated Bank of America Merrill Lynch, Citigroup, HSBC, Morgan Stanley and UBS for a roadshow the week of June 18, a market source said.

The investor meetings will take place in Asia, Europe and the United States.

Recent deals oversubscribed

The final book for lender Banco do Brasil SA's recent $750 million issue of 5 7/8% notes due 2023 was $2 billion, a market source said.

The upsized notes priced Tuesday at 99.023 to yield 6% via bookrunners HSBC, Standard Chartered and Banco do Brasil.

About 43% of the orders came from the United States, 37% from Europe, 7% from Asia and 13% from Latin America and other regions.

The new $500 million issue of 5.15% notes due 2022 from Brazil-based aircraft producer Embraer SA was also oversubscribed.

The notes priced at par to yield 5.15%, or Treasuries plus 248.6 bps with Citigroup, Itau Unibanco and Morgan Stanley in a Securities and Exchange Commission-registered deal.

The final book was about $3.5 billion.

Aleesia Forni contributed to this article.

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