Development Bank of Kazakhstan prices notes on slower, mixed day; Pacific Andes cancels deal

By Christine Van Dusen

Atlanta, Jan. 25 - Emerging markets assets had a mixed-to-weaker day on Tuesday, even as the success of the first European Financial Stability Facility sale and better earnings from Abu Dhabi Commercial Bank PJSC suggested that the global economic picture is improving.

The fairly busy pace of new issuance slowed on Tuesday, with just Development Bank of Kazakhstan pricing notes while Russia's VimpelCom, El Salvador and Argentina's Tarjeta Naranja SA moved toward the market. At the same time, Hong Kong's Pacific Andes Resources Development Ltd. canceled its planned deal.

"It feels like things are mildly softer," said a New York-based market source. "It's nothing drastic, but just a little bit softer after the last couple of days of good strength. Today everything is slightly off."

Said Enrique Alvarez, debt strategist with think tank IDEAglobal: "In general the market is drifting again."

Though the first European Financial Stability Facility was more than eight times oversubscribed, the greater impact on the debt markets remains unclear.

"The €5 billion issue was a roaring success. The AAA rating, the pooled credit risk and the relatively attractive pricing - 6 basis points over mid-swaps - ensured that demand was strong," said Gavan Nolan, analyst with Markit, in a report. "Whether the EFSF bonds affect demand for Eurozone government bonds remains to be seen."

Argentina names down overall

The JPMorgan Emerging Markets Bond Index Plus finished the day wider by about 4 basis points, with most sovereigns between 2 and 10 bps wider.

Russia, meanwhile, stayed resilient even after Monday's airport suicide bombing, with five-year credit default swap spreads just 1 bp wider.

"It's been sort of a mixed bag," Alvarez said. "There's a very widespread focus on the different rate hikes taking place not only in Latin America but across the spectrum in EM."

Bond price action was mixed too, he said. As Argentina moved its target for a debt repayment deal with the Paris Club of nations to June from March, the sovereign was seen backtracking in the markets.

"There has been a little bit of a setback," Alvarez said. "Argentina is off nearly 1% on the day, and 14 bps wider. The 2033s are at 92 bid after signing off yesterday at 92. So it's flat on the day, but I think other Argentine credits are slightly lower. That's why we see a slight dip in the Argentina index numbers."

Kazakhstan Development prices

Development Bank of Kazakhstan priced a $277 million add-on to its 5½% notes due Dec. 20, 2015 at 102.355 to yield 4.95%, a market source said.

Citigroup, Deutsche Bank and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

The original issue totaled $500 million and priced on Dec. 9 at 99.055 to yield 5.72%.

This followed the late-Monday pricing of Turkey-based lender Turkiye Is Bankasi AS's $500 million 5.1% notes due Feb. 1, 2016, which came to market at 99.132 to yield 5.3%, or Treasuries plus 329.1 bps, a market source said.

The Rule 144A and Regulation S deal priced at the tight end of talk, which was set at the 5.35% area.

JPMorgan, RBS, Standard Bank and Standard Chartered were the bookrunners for the notes, which had a final book of more than $1.1 billion from more than 120 orders. About 42% came from the United States, Latin America and Canada while 24% came from the United Kingdom, 16% from Europe, 11% from Switzerland, 5% from Asia and 2% from the Middle East.

Asset managers accounted for 52% while banks and private banks accounted for 34%, hedge funds 13% and insurers 1%.

Bakrie does deal

Indonesia-based telecommunications company PT Bakrie Telecom Tbk. also brought a deal late Monday, pricing a $130 million tap of its 11½% notes due May 5, 2015 at 107 to yield 9.463%, a market source said.

Credit Suisse and Morgan Stanley were the bookrunners for the Rule 144A notes, which are callable on May 7, 2013.

Proceeds will be used to refinance a $30 million bank loan and $50 million in equipment vendor payables. Any remaining proceeds will be used to fund the company's future capital expenditures.

The original $250 million Rule 144A issue priced on April 30, 2010 at par.

Tarjeta, VimpelCom talk notes

Argentina-based credit card company Tarjeta Naranja set price talk for its planned issue of $150 million to $200 million senior notes due 2017 at a yield in the 9% area, a market source said.

Bank of America Merrill Lynch and Deutsche Bank are the bookrunners for the deal, which is expected to price early next week.

The notes are callable at par plus the coupon in 2014, par plus half of the coupon in 2015 and par plus a quarter of the coupon in 2016.

In another upcoming deal, Russian telecommunications company VimpelCom whispered its planned benchmark-sized issue of dollar-denominated notes at the mid-swaps plus mid-400 bps area, a market source said.

Barclays Capital, BNP Paribas, Citigroup and RBS are the bookrunners for the Rule 144A and Regulation S deal. Proceeds will be used to fund a merger with Wind Telecom.

Also on Tuesday, El Salvador announced plans to issue as much as $650 million in notes due 2041, a market source said.

Proceeds will be used for debt refinancing.

Pacific Andes cancels offering

Meanwhile Hong Kong-based seafood company Pacific Andes canceled plans for a renminbi-denominated issue of notes with a maturity of between three and five years, a market source said.

No information on the cause for the delay was available Tuesday.

Bank of America Merrill Lynch, HSBC and Standard Chartered were the bookrunners for the Regulation S deal, which was talked at a yield of between 5½% and 5¾%.

Egypt eases after protests

Egypt was in focus on Tuesday as anti-government demonstrators converged on Cairo - reportedly inspired by the overthrow of Tunisia president Zine El Abidine Ben Alie - and were met with tear gas from local police forces. The sovereign's 5¾% 2020 notes were seen trading Tuesday at 99.75, easing 0.5 point from Monday's close at 100.25 bid, 101 offered.

Also on the market's mind: Abu Dhabi Commercial Bank, which reported better earnings for 2010, indicating that the United Arab Emirates' formerly embattled financial sector is recovering.

"They have two dollar bonds that trade. The 2014 dollar senior was bid at z-curve plus 240 bps and their floating-rate 2016 bond was last sighted at 86 bid, 87 offered," the trader said.

Middle East sees good demand

Another Middle Eastern credit, Abu Dhabi National Energy Co., saw its 5.62% 2012 notes trading at 104.90 bid, 105.20 offered after closing Monday at 104.870 bid, 105.120. The corporate's 7¼% 2018s finished Tuesday unchanged at 112.12 bid, 112.62 offered.

"There's good liquidity," a London-based trader said. "The 2013 euro notes and 2014 dollar notes look rich on spread terms. However, there is very little paper around in the street."

Other standouts from the region included Saudi British Bank's 3% 2015 notes and First Gulf Bank's 4% 2012 notes.

"They go to the top of the class this week on good Street demand," the trader said.

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