Braskem prices bonds as spreads tighten; Allahabad Bank, First Gulf Bank offerings ahead

By Christine Van Dusen

Atlanta, July 19 - Brazil's Braskem America Finance Co. sold notes on a stronger Tuesday for emerging markets assets, which showed some immunity to the world's negative headlines and saw spreads move tighter. Volumes, however, remained somewhat thin.

"We do have good news as the European Union is seemingly closer to the reality of issuing common euro area bonds, which is supporting prices on the open and sending spreads 3 to 5 basis points tighter," a London-based trader said. "It was better than yesterday, but volumes are still anemic. We are bouncing, following a Monday sell-off."

Said a New York-based market source: "Overall the market is very, very firm and shrugging off the events of the world. Technicals are strong."

In trading, Turkey showed strength while Qatar's Qtel International experienced solid demand and the recent issue of notes from Russia's Metalloinvest Finance Ltd. traded up.

"A solid morning for risk in Europe, with the potential catalysts being last night's IBM result and reports that the euro area is studying a bank tax as an alternative to Greek debt default," according to a report from RBC Capital Markets. "Appetite for risky assets globally returned Tuesday, boosted by renewed optimism that a deal in U.S. debt ceiling negotiations will be struck soon, generally better U.S. corporate earnings reports as well as some calming in concerns over the euro zone sovereign debt crisis."

The JPMorgan Emerging Markets Bond Index spread closed 1 bp tighter, with Venezuela a standout at 11 bps narrower.

Tuesday also saw several issuers plan deals, including India's Allahabad Bank, Abu Dhabi's First Gulf Bank PJSC, Turkey's Turkiye Vakiflar Bankasi TAO (Vakifbank) and Guatemala's Banco Industrial SA. And Russia's OAO Severstal revived its plan for notes.

Braskem does deal

In its new deal, Brazil-based Braskem America Finance sold $500 million 7 1/8% notes due July 22, 2041 at 98.479 to yield 7¼%, or Treasuries plus 308.1 bps, a market source said.

The notes were talked at a yield of 7 3/8% to 7½%.

Bank of America Merrill Lynch, HSBC and Morgan Stanley were the bookrunners for the Rule 144A and Regulation S deal, which included a make-whole call at 50 bps over Treasuries.

The notes were guaranteed by Braskem SA, a privately owned petrochemical company based in Sao Paulo.

"It's interesting to note that Brazil's Braskem is plumping for a 30-year dollar deal in the midst of this uncertainty," a trader said.

The notes were trading up 40 to 50 cents in the gray market, a New York-based market source said.

Severstal renews plans

Also on Tuesday, Russia-based steel and mining company Severstal resuscitated plans for a five-year issue of dollar-denominated notes, a market source said.

The notes were talked at a yield in the 6¼% to 6 3/8% area.

Goldman Sachs and Barclays Capital are the bookrunners for the deal.

"While offering no great value, the total lack of selling of comps means the deal will get done," a trader said.

And India-based Allahabad Bank is planning an issue of up to $500 million in notes, a market source said.

HSBC, JPMorgan, RBS and Standard Chartered are the bookrunners for the deal, which was marketed on a roadshow that ended Tuesday.

First Gulf plans roadshow

In other deal-related news, Abu Dhabi-based lender First Gulf Bank is planning a roadshow for an issue of notes as part of its $3.5 billion trust certificate issuance program, a market source said.

Citigroup, HSBC and Standard Chartered Bank are the bookrunners for the deal.

The marketing trip will begin July 21 in Kuala Lumpur and travel to Singapore, Abu Dhabi, Dubai and London before concluding on July 26 in Zurich and Geneva.

"Otherwise, new issues are quiet," a London-based market source said.

Vakifbank taps bookrunners

Turkey-based lender Vakifbank has mandated Barclays Capital, Goldman Sachs, JPMorgan and Standard Chartered Bank for a roadshow from July 20 to July 27, a market source said.

A Rule 144A and Regulation S dollar-denominated bond offering is expected to follow.

And Guatemala's Banco Industrial plans to issue 10-year notes this week, a market source said.

Bank of America Merrill Lynch is the bookrunner for the Rule 144A and Regulation S transaction.

Proceeds will be used to repay subordinated debt, to strengthen the regulatory capital base and for general corporate purposes.

Kazakhstan banks in focus

In trading, banks from Kazakhstan were in focus on Tuesday following the release of balance sheet statistics for June, which showed an increase in non-performing loans and overdue loans.

"Non-performing loans increased to 33.27% from 32.86% in May," a London-based analyst said. "This was largely driven by continued deterioration of asset quality in JSC Kazkommertsbank and BTA Bank."

Meanwhile, Alliance Bank's balance sheet improved, she said.

In response, BTA Bank's 2018 dollar notes opened well bid at 86, a trader said.

Metalloinvest volumes good

Looking to Russia, market-watchers were paying the most attention to the metals and mining sector. Good volumes were reported for Metalloinvest.

The mining and metallurgy company recently priced $750 million five-year notes at par to yield 6½% via BNP Paribas, Bank of America Merrill Lynch, Credit Suisse, ING, JPMorgan, Royal Bank of Scotland, SG CIB, Troika Dialog and VTB.

The notes were trading at 100.15 bid, 100.35 offered on Tuesday, a trader said.

"The bond is still 30 bps wide of eventual fair value," another trader said.

Russian banks supported

Russia's banking sector was on the market's mind on Tuesday, with most names better supported and Credit Bank of Moscow on deck.

The lender is planning an issue of dollar notes via Raiffeisen Bank in a Regulation S deal that's being marketed on a roadshow starting July 20.

"Bank of Moscow is still 70 bps wide to VTB Bank, which will soon own 75% of it," a trader said.

Turkey opens stronger

The day also saw the Turkey sovereign open very strong, a trader said.

"All are firmer and better supported on the screens today, but there are still relatively few prints in the market," he said.

By the afternoon, activity was lackluster, he said. And lender Yapi Kredi was suffering.

"It's interesting to note that Yapi Kredi's spread over the corresponding sovereign is widening toward the same level as Finansbank's," he said. "Although the underlying worries about Unicredit are understandable, Yapi Kredi appears to be getting punished excessively."

Qtel, Dubai in demand

In other trading on Tuesday, good demand was seen for Qatar-based Qtel International's long end, a trader said.

"The Middle East and North Africa have burst back into life today, with good demand for Qtel, Dubai and Emirates in particular," he said.

From Latin America, most of the lower-beta names - including Brazil, Mexico and Colombia - were trading well, the New York-based market source said.

"I think we seem to have decoupled from the negative headlines of the world and, if anything, people are just looking for any pull-back to buy paper," he said. "They're looking at these credits as almost a safe haven. Guys who want to just, for lack of a better term, park money in the short end of the credits and pick up a little interest over Treasuries are finding it's almost a safer credit. They'll just sit there and clip a coupon and see what goes on."

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