Market digests new notes from Emirates Islamic Bank, Gazprombank amid limited flows for EM

By Christine Van Dusen

Atlanta, July 5 - Though the United States was out on a holiday on Wednesday, two emerging markets issuers - Dubai's Emirates Islamic Bank and Russia's Gazprombank OAO - pushed new deals that received considerable attention in the secondary market on Thursday.

Market watchers were also very interested in the upcoming issue of up to $4 billion of notes from Qatar, which set the dates for a roadshow.

Still, activity on Thursday was somewhat muted, sources said.

"Risk assets remain relatively stable during the European morning session," according to a report from Barclays Capital Markets. "While peripheral markets have rallied post-E.U. summit, it is on the back of limited flows."

Overall volatility should decline somewhat, Barclays said.

"Our base case is for Spanish and Italian yields to remain elevated and volatile, but not to the same extent as in the recent past," the report said. "The macro impact of these yields on risky assets is likely to fade."

In trading, most emerging markets bonds were wider on Thursday, a London-based trader said.

He pointed to the recent issue from Majid al Futtaim, as well as Dubai's 2022 bonds and the 2019 notes from Dubai-based Jebel Ali Free Zone (Jafza). Jafza's 2019 notes were 14 basis points wider at 104.25 bid, 104.75 offered.

"Yet there still remains some very sticky bonds where the Street needs paper," he said.

On that list were International Petroleum Investment Co.'s (IPIC) 2022 bonds and 2041 bonds; Qtel International's 2019 bonds, 2021 bonds and 2025 bonds; Qatar National Bank; and long-dated Abu Dhabi National Energy Corp. (TAQA).

"Flows are a lot more balanced recently," he added.

Emirates Islamic sells notes

In its new deal, Emirates Islamic Bank priced a $500 million issue of 4.147% notes due Jan. 11, 2018 at par to yield 4.147%, or mid-swaps plus 310 bps, a market source said.

The notes priced tighter than talk, set at mid-swaps plus 330 bps.

Emirates NBD Capital, Credit Agricole, Dubai Islamic Bank, HSBC and Standard Chartered were the bookrunners for the Regulation S-only deal.

The notes traded Wednesday at 100.75 bid, 101 offered before settling in at 100.50 bid, 100.75 offered.

On Thursday the notes opened unchanged, then traded at 100.45 bid, 100.65 offered.

"Plenty of left field sellers but local demand via the Street," a trader said. "Eventually the loose bonds will all disappear, but at the moment there are plenty around at the 100.50, 100.55 level."

The final book was about $5 billion, he said.

Gazprombank does deal

Moscow-based lender Gazprombank priced a CHF 350 million issue of 3 3/8% notes due Aug. 5, 2015 at par to yield 3 3/8%, or mid-swaps plus 321.9 bps. BNP Paribas, Credit Suisse, UBS and Gazprombank were the bookrunners for the Regulation S deal.

In other deal-related news, Abu Dhabi-based real estate developer Tamweel PJSC postponed its proposed dollar-denominated issue of notes based on market feedback, according to a company release.

The company held a roadshow in June in the Middle East, Asia and Europe with Abu Dhabi Commercial Bank, Emirates NBD and UBS Investment Bank.

Singapore-based real estate company Mapletree Investments Pte Ltd. will hold a roadshow in Singapore and Hong Kong from July 11 to 13 with Citigroup, Deutsche Bank Securities and HSBC.

Qatar deal on deck

Qatar has set dates for a roadshow to market its planned issue of up to $4 billion in Islamic bonds, a market source said.

The marketing trip - with Standard Chartered, Deutsche Bank, HSBC, Barwa Bank and QInvest - will be held on Monday and Tuesday in Asia.

"So expect a return to the markets at the middle of next week," a trader said. "The new Qatar [sukuk] - I've heard rumored five-year and 10-year deals - will obviously be well received and have been talked about for some time."

The new notes will be the highest-rated sovereign sukuk the market has seen and should be of such a size that they will be very liquid, the trader said.

"Clearly the investor meetings in Asia will be to solidify the credit in the minds of the massive Asian sukuk funds," he added. "There is not much of a need to get on the road in the Gulf region, obviously. The deals clearly virtually sell themselves. I'm just a little wary of everyone jumping on the bandwagon, forcing pricing in and issuing massive size."

Qatar notes widen

Qatar's existing 2019 to 2042 notes were between 5 bps and 7 bps wider on Thursday, a trader said.

"The 2014s and 2015s remain rock-like," he said.

Though the size of the new Qatar deal will be significant, it is not necessarily a concern for the market, he said. The market has been able to digest large issues of sukuk from Middle Eastern names in the past.

"We've been here before," he said. "Qatari Diar's 2020s were $2.5 billion. [The new Qatar deal] will most likely be one of the last Middle East and North Africa deals before the summer and Ramadan lull."

IPIC performance 'staggering'

Taking a closer look at IPIC, the company's 2021 bonds traded at 109.25 bid, 109.75 offered, a trader said.

IPIC's 2041 bonds hit a new high of 120.25.

"That's a staggering effort, and 100 bps tighter over the month," he said. "It's now comfortably bid at 120. Not bad for a bond that was at 100.50 in January."

Bahrain notes move higher

The Kingdom of Bahrain's recent $1.5 billion issue of 6 1/8% notes due July 5, 2022 - which priced at 99.867 to yield 6.143%, or mid-swaps plus 437.5 bps - was trading at 100.57 bid, 100.77 offered.

Citigroup, Gulf International Bank, JPMorgan and Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S deal.

The $500 million issue of 5¼% seven-year notes from Majid Al Futtaim that came to the market at par was seen at 100.30 bid, 100.65 offered.

JPMorgan, National Bank of Abu Dhabi, Barclays Capital, Standard Chartered and UBS were the bookrunners for the Regulation S transaction.

Saudi lender drifts

Saudi Arabia-based Islamic Development Bank's recent five-year $800 million sukuk, which came to the market at a profit rate of 1.357% and priced at par to yield mid-swaps plus 40 bps, was trading at 99 bid, par offered.

"Textbook ISDB," a trader said. "The deal comes, never really trades in the secondary, ends up just drifting."

Lebanon, Doha make moves

Lebanon was in the news on Thursday after Fitch Ratings affirmed the sovereign's long-term foreign and local currency issuer default ratings at B.

"The affirmation of the rating reflects the fact that Lebanon's substantial and rising foreign exchange reserves, lower debt levels, and reduced interest costs, relative to the previous decade, mitigate the downside risks to political stability, growth and public finances in 2012," Fitch said in its report.

The sovereign's 2016 notes were trading at 99.37 bid, 100.37 offered, while its 2026 notes were seen at 101.25 bid, 102.25 offered.

Qatar's Doha Bank, meanwhile, was "on the move," a trader said.

The lender's 2017 notes were up at 101, 38 bps tighter on the month.

Bulgaria, VEB trade up

The recent issue of €950 million 4¼% notes due July 9, 2017 from the Republic of Bulgaria were seen at 100.59 bid, 100.69 offered after pricing at 99.182 on July 2.

The notes came to the market at a spread of mid-swaps plus 350 bps via BNP Paribas, HSBC and Raiffeisen Bank in a Regulation S deal.

Russian lender Vnesheconombank (VEB), which priced a $1 billion issue of 6.025% notes due July 5, 2022 at par on June 27, saw its newest notes trading at 102.50 bid, 103 offered.

Credit Agricole, JPMorgan, Deutsche Bank and HSBC were the bookrunners for the deal.

Demand for African bonds

Solid demand was reported for bonds from South Africa.

"There are also a few buyers around Gold Fields Ltd. ... and Eskom Holdings," the trader said. "Five-year South African credit default swaps are at 153 bid, 158 offered."

African Export Import Bank's 2016 notes saw a pick-up in activity.

"Meanwhile, there seems to be demand for Ghana and Nigeria," he added.

Aleesia Forni contributed to this article.

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