Middle Eastern bonds shine at month-end; Credito Real ponders issuance; Qatar bonds eyed

By Christine Van Dusen

Atlanta, Feb. 28 - Emerging markets ended February in surprisingly good shape amid the turmoil in Ukraine, with issuers from the Middle East - including Saudi Arabia's Dar Al-Arkan Real Estate Development Co. and GEMS MEA Sukuk Ltd. - weathering the storm particularly well.

"All of this is happening against a macro- and geo-political backdrop that has hardly been rosy," a London-based trader said. "It just continues to show the defensive and technical nature of this market. And I think it still confounds and confuses many around the globe."

GEMS' recent 12% perpetual notes that priced at par moved to 112 bid on Friday, he said.

"Small deal, nice headline yield and only seeing retail adding after some loose bonds in early February were soaked up," he said.

Bonds from Qatar saw only buyers at the end of the week, a trader said.

"There are plenty of bonds that look fully priced," he said. "I think the long end of the sovereign is lagging a little and Qatar's 2040s and 2042s versus the belly look interesting."

Qtel International's bonds, meanwhile, have tightened 30 bps to 40 bps, he said.

"The end of another impressive month," he said. "The only [Gulf Region] bonds wider on the month are really short-dated ones where the spread change has moved wider - but they retain very solid support from Treasury and money market desks - or bonds which are arguably fully priced, like Qtel's 2016s or Sabic's 2015s."

In other news on Friday, Mexico's Credito Real SAB de CV was looking at issuing new notes alongside a tender offer, a market source said.

Dubai notes 'impressive'

From Dubai, the upgrade of Emaar Properties PJSC improved the company's 2019s by 75 bps, the trader said.

"Very impressive," he said.

The recent issue from Dubai Investments PJSC - 4.291% Islamic bonds due 2019 that priced at par - traded Friday at 101.

"Dubai Electricity and Water Authority is another name that's had an impressive run," he said. "There is very good interest in the 2020s, and they close the month out 50 bps tighter."

The sovereign's bonds were very strong too, he said.

"Needs a new issue here," he said.

Abu Dhabi names get support

Looking to Abu Dhabi, bonds from the sovereign remained rock-solid, the trader said.

"Very solid demand for really everything, and the market is desperate for some supply, which I hope will be coming in March," he said. "Granted, many names 'don't need the money.' But as Abu Dhabi Commercial Bank showed, popping up with a little five-year deal at 140 bps over to help their curve keep liquidity ticking over while staying in front of investors is a good approach."

The front end of International Petroleum Investment Co. traded heavily at the end of the week and month, he said.

"Very well-supported," he said. "Aldar Properties' 2018, for me, is the best value in Abu Dhabi incorporated. The name is on watch-positive, it's a sub-five-year, it's a sukuk, and Aldar is vital to the whole Abu Dhabi story. There are some loose bonds to clear near 102.40 bid, 102.50 offered, but over the next few months as the 2014s mature, this one looks good value."

IDB bonds widen

Bucking the trend, Islamic Development Bank's recent $1.5 billion 1.8125% Islamic bonds due March 6, 2019 that priced at par to yield 1.812% widened by 2 bps on Friday, a trader said.

The notes came to the market at mid-swaps plus 23 bps with CIMB, Commerzbank, First Gulf Bank, HSBC, Natixis, National Bank of Abu Dhabi and Standard Chartered Bank in a Regulation S sukuk.

The issuer is a Jeddah, Saudi Arabia-based lender.

Kuwait in demand

Investors remained attracted to bonds from Kuwait during the week, particularly those from Kuwait Projects Co. and its 2019s, a trader said.

"Just a really impressive performance and with supply out of the way, and with the free float on this $500 million bond disappearing it is leading some older laggards higher," he said.

Bonds from Bahrain also ended the month on solid footing, he said.

"The sovereign has probably reached where I thought it could get to, but again, they trade very well, despite the rally," he said. "BBK Bank has tightened 65 bps on the month."

Credito Real could issue

The primary market was quiet on Friday, save for the news that Mexico-based consumer financing services company Credito Real is considering an issue of new notes alongside a tender offer, a market source said.

The tender offer and consent solicitation for its outstanding 10¼% senior notes due 2015 began this week.

The total purchase price will be $1,095 per $1,000 of notes tendered by 5 p.m. ET on March 10, the early tender date.

The total amount includes an early tender payment of $30 per $1,000 of notes.

The tender offer will end at midnight ET on March 24, with early settlement set for March 13.

No other details on the possible new issue were immediately available on Friday.

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