Big issue from Kazakhstan's KMG; EM trading busy; tighter spreads; new Uralkali notes up

By Christine Van Dusen

Atlanta, April 24 - Spreads tightened on Wednesday for emerging markets assets as the primary market hosted new deals from Kazakhstan's KazMunaiGaz National Co. (KMG), Russia's Far Eastern Shipping Co. plc (Fesco), Korea Export-Import Bank (Kexim), Singapore's Courts Asia Ltd. and South Africa's FirstRand Bank Ltd.

"Another busy session, although it slowed down as the day went on," a London-based trader said.

The Markit iTraxx SovX CEEME ex-EU index narrowed 8 basis points to Treasuries plus 190 bps on Wednesday. The corporate index, which was seen Tuesday at 240 bps over Treasuries, tightened by 9 bps.

Against this backdrop, Turkey's Turkiye Finans Katilim Bankasi AS (Finansbank) and Russia's Alliance Oil Co. Ltd. set price talk, Russia's OJSC Magnitogorsk Iron and Steel Works (MMK) continued its roadshow, and Ukraine's Lemtrans looked to issue eurobonds.

In trading, perpetual notes from the Gulf region remained in favor on Wednesday.

The recent issue from Abu Dhabi Islamic Bank that priced at par closed the session at 106 bid, 106½ offered.

The perpetual notes that Dubai Islamic Bank priced at par ended Wednesday at 102 bid, 102½ offered.

"Risk-on sentiment in Asian markets has resulted in US Treasuries selling off this morning," a London-based analyst said. "Russian corporates are seeing a good tone, tightening 5 bps to 10 bps, generally."

The recent $3 billion notes due in 2018 and 2023 from Russia-based oil and gas company OAO Lukoil were fairly active on Wednesday.

"The new Lukoil continues to clear with the 2018s and 2023s at new highs," the analyst said. "We are also seeing demand for Phosagro's 2018s, trading 23 bps wide to Uralkali. The Russian sovereign is a couple tighter this morning, but the long end is drifting down in price terms on the dollar move."

KMG prints $3 billion deal

Kazakhstan-based gas company KMG priced a $3 billion two-tranche issue of notes due 2023 and 2043, a market source said.

The deal included $1 billion 4.4% notes due 2023 that priced at 99.60 to yield 4.45%.

The notes were talked at a yield in the 4.65% area.

The second tranche of $2 billion 5¾% notes due 2043 priced at 99.293 to yield 5.8%. Talk was set in the 6% area.

BofA Merrill Lynch, Barclays, Halyk Finance and Visor Capital were the bookrunners for the Regulation S deal.

Bonds from Turkey, Africa

Corporate bonds from Turkey saw further demand on Wednesday.

"In Europe, the market is creeping slightly higher," the analyst said. "We have seen good bids for long-end Hungary, and trading activity in Lithuania and Latvia."

And bonds from South Africa were well bid, closing 7 bps to 10 bps tighter.

"Angola is a shade tighter, and Zambia went through at 98¼ earlier this afternoon before closing at 98.37 bid, 98.87 offered. That's still the best part of 30 bps wider on the month."

He's keeping his eye out for the upcoming issue of notes from Rwanda, which is expected to total $400 million with a 10-year tenor and a yield in the low-7% area.

ADCB sees demand

From the Middle East, some better sellers appeared for Abu Dhabi Commercial Bank's 2018s and 2023s, a trader said.

"I think they still trade rich, but you can't fight the demand I am seeing regionally," he said. "The five-year government Dubai bond trades near 215, so this four-year bond looks OK. More retail investor demand on some higher-yielders."

Long-dated notes from the Qatar sovereign were popular on Wednesday, a trader said.

"And some of the front-dated bonds have totally disappeared," he said, pointing to Mubadala's 2014s and Qtel International's 2014s. "Likewise the Abu Dhabi National Energy Co. 2013s and 2014s."

QNB steady

The recent issue of $1 billion 2 7/8% notes due 2020 from Qatar National Bank SAQ was very steady in trading on Wednesday, a trader said.

The notes came to the market at 99.216 to yield 3%, in line with talk.

The new 2020s saw two-way interest and were quoted Wednesday at 99.31 bid, 99.41 offered.

Deutsche Bank, HSBC, JPMorgan, Mitsubishi UFJ Securities, Qatar National Bank and Standard Chartered Bank were the bookrunners for the Regulation S deal.

"The new QNB 2020s are holding well but slightly off high prints with the US Treasury move," a trader said.

Fesco sells bonds

In another new deal on Wednesday, Russia's Fesco priced a two-tranche issue of $800 million notes due 2018 and 2020, with both parts coming to the market at par, a market source said.

The deal included $500 million 8% notes due 2018 that priced at par to yield 8% and $300 million 8¾% notes due 2020 that priced at par to yield 8¾%.

Goldman Sachs, ING and RBI were the bookrunners for the Regulation S deal.

"The new Fesco is opening stronger, with the five-year trading at 100¾ and the seven-year at 101," a trader said.

Kexim prices notes

Korea's Kexim sold a €750 million issue of 2% notes due 2020 (Aaa3) at 99.774 to yield 2.035%, or mid-swaps plus 95 bps, a market source said.

Barclays, Credit Agricole, Deutsche Bank, Standard Chartered Bank and UBS were the bookrunners for the deal.

New deal from Courts Asia

Singapore-based retailer Courts Asia priced S$125 million 4¾% notes due 2016 at par to yield 4¾% via DBS and HSBC.

The deal is part of a S$500 million multicurrency debt issuance program under which Court Asia plans to issue from time to time securities, including notes and perpetual securities, in series or tranches denominated in Singapore dollars or in other currencies, and they may carry a fixed-, floating-, variable- or hybrid-rate coupon or, alternatively, no coupon.

The securities will be offered based on exemptions invoked under sections 274 and/or 275 of the Securities and Futures Act, chapter 289, of Singapore, the notice said.

Proceeds will be used for repaying existing borrowings or financing general corporate purposes.

FirstRand taps 2016s

South Africa-based lender FirstRand priced a $150 million add-on to its existing 4 3/8% notes due 2016 at 105.787 to yield 2.43%, market sources said.

JPMorgan, Mitsubishi UFJ Securities, Standard Chartered Bank and UBS were the bookrunners for the transaction.

The original $300 million issue of notes priced at 99.548 to yield 4.477%.

"A successful tap of the First Rand 2016s today," a trader said. "This bond has been very well placed and quite technical for some time, so it was a pretty easy one to tap."

The notes' price was about a point off from where the existing notes were trading a week ago, he said.

Uralkali does deal

Late on Tuesday, Russia's Uralkali sold a $650 million issue of 3.723% notes due 2018 at par to yield 3.723%, or mid-swaps plus 285 bps, a market source said.

The notes priced tighter than talk, set in the mid-swaps plus 300 bps area.

BofA Merrill Lynch, Goldman Sachs, Sberbank and VTB Capital were the bookrunners for the Rule 144A and Regulation S deal.

Uralkali is the world's largest producer of potash.

The notes strengthened in trading on Wednesday, moving to 1001/4.

Finansbank sets talk

Turkey's Finansbank set price talk in the 4% area for its upcoming issue of dollar-denominated notes due in 2018, a market source said.

Citigroup, HSBC, NCB Capital and Noor Islamic Bank are the bookrunners for the deal.

And Russia's Alliance Oil set initial price talk in the 7¼% area for its upcoming issue of dollar-denominated notes due in seven years.

Deutsche Bank, Gazprombank, Goldman Sachs and Raiffeisen Bank are the bookrunners for the Rule 144A and Regulation S deal.

Lemtrans deal ahead

Ukraine's Lemtrans is looking to issue eurobonds, a market source said.

The proceeds will be used to purchase railway goods wagons.

No other details were immediately available on Wednesday.

Lemtrans is a Donetsk, Ukraine-based freight forwarding company owned by SCM Group.

MMK on the road

Russia-based steel producer MMK is on a roadshow for a dollar-denominated issue of benchmark-sized bonds, a market source said.

MMK will use the proceeds from the loan to refinance its existing indebtedness and for other general corporate purposes.

The company has a strong market position, the London analyst said.

"However, low levels of vertical integration may be problematic when the market in raw materials recovers," she said. "Considering the net leverage - 2.6 times - and that this is MMK's first eurobond for several years, we would expect the new bond to come slightly wide to OAO Severstal."

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