Karawaci prints bonds; Turkey, Russia tighten; Croatia bonds falter; Middle East unchanged

By Christine Van Dusen

Atlanta, April 4 - Indonesia's Lippo Karawaci Tbk sold notes on Friday as emerging markets bonds moved tighter and investor sentiment improved, buoyed by better payrolls and unemployment data from the United States.

"Concerns at the beginning of the week that the start of the second quarter would see sellers have proven unfounded as EM enjoyed a strong week with tightening across the board," a London-based analyst said.

Particular standouts on Friday included bonds from Turkey and Russia, with the latter helped by a lack of significantly negative headlines related to tension with Ukraine.

"That doesn't mean [the headlines] have stopped," the analyst said, noting that the United Kingdom's foreign secretary has said the European Union should prepare for more sanctions against Russia.

"Nonetheless, the West appears to have all but accepted the annexation of Crimea, and the remaining tension is focused on Russia's withdrawal of troops, which is moving far slower than the West would like," she said.

Also contributing to the tightening for Turkey and Russia was a lack of supply and investors putting money back to work, she said.

"Investors have been buying the Russian complex, shrugging off macro concerns," she said. "Russian banks end the week 41 basis points tighter on average, with some names now only circa 20 bps wide of pre-Crimean crisis levels."

Russian Agricultural Bank's 2021s tightened about 104 bps, she said.

"VTB Bank bonds generally underperformed this week," she said. "We still think VTB 2017s appear unfairly cheap, trading wide of the 2018s and 2020s."

Russian corporates, overall, were about 30 bps tighter on average.

Turkey banks tighten

Taking a closer look at Turkey, banks continued to put in a strong showing by the end of the week, following election results and a lift of the ban on Twitter, the analyst said.

The banks tightened an average of 40 bps.

"Isbank enjoyed a solid week, circa 50 bps tighter, while Bank Asya was the clear underperformer after very strong performance last week," she said.

Slovenia performs

Elsewhere in emerging Europe, Croatia's bonds underperformed, with the 2024s moving 8 bps wider, a trader said.

And the new two-tranche issue of €2 billion notes due 2017 and 2021 from Slovenia attracted attention during the week, drawing a combined final book of €9.5 billion.

The deal included €1 billion 1¾% notes due in 2017 that priced at mid-swaps plus 115 bps.

The €1 billion 3% notes due 2021, which priced at 99.478 to yield mid-swaps plus 173 bps, were 20 bps tighter on Friday.

"We saw the secondary curve re-price as well," she said.

Barclays, Commerzbank, HSBC, Societe Generale and Unicredit were the bookrunners for the Regulation S deal.

Middle East in focus

The Middle East's banks and corporates were mostly flat at the end of the week, a trader said.

"Abu Dhabi Commercial Bank was among the top performers, tightening 9 bps to 14 bps on the week," she said. "Sharjah Islamic Bank was the underperformer - the '16s were 16 bps wider - despite Fitch upgrading the viability rating at the end of last week."

Also underperforming were bonds from DPWorld and Dubai Investments Park Development.

"Saudi Electricity Co.'s new dual-tranche issue is largely unchanged since launch," she said.

She expects other Gulf region issuers to come to the market soon.

Karawaci sells notes

Indonesia's Lippo Karawaci, through Theta Capital Pte. Ltd., priced $150 million 7% notes due 2022 at par to yield 7%, a market source said.

Citigroup, Deutsche Bank, BofA Merrill Lynch and Credit Suisse were the bookrunners for the deal.

The issuer is a Tangerang, Indonesia-based residential and commercial urban developer.

Gulf Keystone plans issuance

Iraq-focused Gulf Keystone Petroleum Ltd. is looking to issue up to $250 million of notes next week, according to a company announcement.

The company recently concluded a roadshow for the Rule 144A and Regulation S deal in the United States, Europe and Asia.

London-based Gulf Keystone is an independent oil and gas exploration, development and production company focused on exploration in the Kurdistan Region of Iraq.

Tunisia gets U.S. guarantee

Tunisia is expected to issue about $500 million of bonds with a sovereign loan guarantee from the United States, according to a press release from the U.S. government.

"This guarantee reinforces the United States' firm commitment to the people of Tunisia by strengthening the Tunisian Republic's ability to maintain access to international financing during its transition, while bolstering Tunisia's ability to implement economic reforms and lay the groundwork for broad-based, economic growth," the announcement said.

This is the second sovereign loan guaranteed provided to Tunisia by the United States, following a $485 million loan guarantee in 2012.

Bond funds see inflows

In other news on Friday, emerging markets bond funds saw inflows for the week ended April 2, the analyst said.

"We also saw inflows into EM credit funds of $1 billion," she said. "But we also note that the new issue pipeline is increasingly likely to jolt back into action."

She pointed to market whispers about a possible issue from Russia's OAO Lukoil in the near future.

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