Hungarian Development Bank, Bancolombia print notes on firm but fragile day for EM

By Christine Van Dusen

Atlanta, May 24 - Hungarian Development Bank plc and Bancolombia SA sold notes on a slightly better Tuesday for emerging markets assets, though Greece's continuing troubles still dampened risk sentiment and kept volumes thin.

"Risk appetite remains fragile," according to a report from RBC Capital Markets.

"The market is firmer but not running away," commented a London-based trader. "The question is: was yesterday the dip - not so much on cash price but on a spread basis - or is there more to come? I still feel spreads are a little tired in the lower-beta space, but with basically four trading days left in May we appear to have navigated the icebergs so far."

Dodging those icebergs on the way toward the market on Tuesday were several EM issuers with planned notes, including India-focused Vedanta Resources, Brazil-based Centrais Eletricas do Para SA (Celpa) and Doha-based Qatar Islamic Bank.

In trading, names from the Middle East started the day tighter, and Kazakhstan-based lender JSC Kazkommertsbank was an outperformer. But investors maintained a cautious stance.

The JPMorgan Emerging Markets Bond Index Plus spread closed flat at Treasuries plus 281 basis points, with Venezuela wider by 11 bps on the news that the United States will be imposing sanctions on state-owned oil company Petroleos de Venezuela SA (PDVSA) for its involvement with Iran.

Banks price deals

In its new deal, Budapest-based commercial lender Hungarian Development Bank priced €500 million notes due May 31, 2016 at mid-swaps plus 320 basis points, a market source said.

The notes priced at the low end of talk, which was set at mid-swaps plus 320 bps to 330 bps.

BNP Paribas, ING and Societe Generale were the bookrunners for the notes.

And Colombia-based lender Bancolombia sold $1 billion of 5.95% senior notes due June 3, 2021 at 99.539 to yield 6.012%, or Treasuries plus 290 bps, a market source said.

Bank of America Merrill Lynch and JPMorgan were the bookrunners for the Rule 144A and Regulation S notes.

Proceeds will be used for general corporate purposes.

Vedanta sets maturity dates

Also on Tuesday, India-focused metals and mining company Vedanta Resources set the tenors for its planned issue of dollar notes at five and 10 years.

The notes are rated BB by both Standard & Poor's and Fitch Ratings. Moody's Investors Service expects to rate the notes Ba3 if the company completes its acquisition of 60% of Cairn Energy's India unit. In that event, proceeds will be used to finance a portion of the purchase price.

If the acquisition does not go through, the notes will be rated Ba2 by Moody's and the proceeds will be used for capital expenditures, debt repayment and general corporate purposes.

The Rule 144A and Regulation S notes, which include a change-of-control put at 101%, are expected to price this week.

Celpa, QIB advance deals

The day also saw Brazil-based power generator Celpa set the maturity date for its planned issue of dollar notes at five years, a market source said.

Bradesco BBI, HSBC, Itau and Standard Bank are the bookrunners for the Rule 144A and Regulation S notes, which are non-callable for three years and include a change-of-control put at 101%.

Proceeds will be used for the repayment of short-term debt.

And Doha-based Qatar Islamic Bank set the size for its planned issue of sukuk notes at $1 billion, a market source said.

The tenor is expected to exceed five years.

No other details were immediately available on Tuesday.

Dubai opens tighter

In trading, issuers from Dubai opened the session on Tuesday between 2 and 4 bps tighter, with good volume trading for Dubai Water and Electricity Authority's (DEWA) 2020 dollar notes at 103.

"Very good size traded at 103 in the market," a London-based trader said. "If anything, the Dubai 2014 dollar notes appear a little heavy. I can still see room for DEWA's 2015 dollar issue to tighten, though it is 11 points above par."

And Saudi Arabia-based Islamic Development Bank's 2.35% sukuk notes due 2016 - which priced at par on May 18 - opened on Tuesday at 99.65 bid, 99.85 offered.

Bahrain's BBK in demand

Also from the Middle East, names from Bahrain started the day tighter by two to four bps, with BBK remaining popular.

The 4.715% sukuk notes due 2016 from the United Arab Emirates' Sharjah Islamic Bank, issued through SIB Sukuk Co. II Ltd., were trading Tuesday at 101.60 bid, 101.85 offered.

And Abu Dhabi National Energy Co. was slightly tighter on Tuesday, with some interest in the long end, a trader said.

Russian banks, Turkey get attention

Looking at Russia, most banks were unchanged at the open on Tuesday, with some buying seen for Alfa Bank's 2021 notes. The 2021 notes, which priced at par on April 19, were trading at 102.80 bid, 103.30 offered.

Turkey was firmer, following improved capacity utilization and industrial confidence data, indicating strong economic activity.

"However, the closing output gap increases the inflationary pressures. So tomorrow eyes will be on the last Monetary Policy Committee meeting before the elections. To hike or not to hike - that is the question," a trader said. "Volume was thin on corporates. Locals, on the other hand, were generally buying the long end of the sovereign curve today."

Finansbank untouched by NBG

Turkey's banks were somewhat firmer on Tuesday. Market-watchers were particularly interested in Finansbank AS, which appeared to be unaffected by the downgrade of the long-term issuer default rating for National Bank of Greece - which is a 94.8% shareholder in Finansbank - to B+.

"We believe Finansbank is pretty ring-fenced from NBG in its operations and funding," a trader said.

Finansbank's 2016 notes were trading Tuesday at 96.375 bid, 97.125 offered after pricing at 99.384 on May 5.

GTB stays popular

Among issuers in Africa, Nigeria's GTB Finance BV saw some demand for its 2016 notes, which priced at 98.981 on May 12. The notes were trading Tuesday at 101.56 bid, 102.06 offered.

"Egypt is seeing better offers on sovereign paper in the street after decent week-on-week performance," a London-based market source said.

And better selling was noted for Lebanon and its 2019 notes, which priced at par on May 18 and were seen Tuesday at 100.03 bid, 100.18 offered.

Ukraine, KKB in focus

A trader also noted some activity for Ukraine, with some buying of the long end. "But price impact has been marginal," he said.

The one outperformer of the day was Kazakhstan-based lender JSC Kazkommertsbank, which saw good demand along the curve.

"KKB's 2018 dollar notes are back at 99 now, with KKB surely itching to tap it if it goes back to reoffer," the trader said. "Why you buy KKB over the other Kazak names, I'm not sure. Kazak banking troubles are industry-wide."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.