Evraz, Kexim, DBS Bank price deals; Pakistan widens on downgrade; Petrobras up on 'oil-rig' buzz

By Paul A. Harris

St. Louis, May 15 - Emerging markets continued overall stronger on Thursday, according to a syndicate official who spoke to Prospect News on Thursday afternoon.

"There is clearly an upside take on the market right now," the source said.

Meanwhile a trader who focuses on Asian credits saw the broad emerging markets 4 to 5 basis points tighter on the day, and added that the May 12 earthquake in Sichuan, China, has yet to register any meaningful impact on Chinese or other Asian debt.

Other emerging markets participants in the United States signed off on that assertion during the Thursday session.

Meanwhile the primary market saw terms from three deals.

Evraz taps April deals

Russia's Evraz Group SA (existing ratings Ba2/BB-/BB) raised $404.6 million of proceeds by tapping two of its existing issues on Thursday.

The Moscow-based vertically integrated steel and mining concern priced a $250 million add-on to its 8 7/8% notes due April 24, 2013 at 101.15 to yield 8.579%.

The reoffer price came at the rich end of the 100.85 to 101.15 price talk.

The tap increased the size of the issue to $1.3 billion. The original $1.05 billion priced at par on April 17.

Evraz also priced a $150 million add-on to its 9½% notes due April 24, 2018 at 101.15 to yield 9.371%.

Again, the reoffer price came at the rich end of the 100.85 to 101.15 talk.

The tap increased the issue of 9½% notes due 2018 to $700 million. The original $550 million also priced at par on April 17.

A source close to the deal said that it went very well, with both issues trading above issue price in the aftermarket.

The order book for the 2018 bonds was $783 million, and there were $860 million of orders for the 2013 bonds.

The source said that the order books were a mix of U.S. high yield, emerging markets and some crossover accounts.

The source added that the Thursday taps went well because the notes of the original issues have traded well.

"The allocations for the original notes were pretty severe," the source added.

Kexim sells euro issue

Elsewhere on Thursday Export-Import Bank of Korea (Kexim) priced a €750 million issue of 5¾% five-year notes (Aa3/A/A+) at a 138 basis points spread to mid-swaps on Thursday.

The spread came 2 bps below the mid-point of the 140 basis points area price talk.

The off-the-shelf notes came at an original issue discount of 99.531.

Citigroup, Deutsche Bank Securities, Depfa, HSBC and RBS Greenwich Capital led the deal.

DBS Bank brings hybrid

DBS Bank priced S$1.5 billion of guaranteed hybrid Tier I perpetual preference shares on Thursday.

The preferreds will pay a non-cumulative dividend of 5¾% per year for the first 10 years. Beginning June 15, 2018, the dividend will equal the three-month Singapore dollar Swap Offer Rate plus 341.5 basis points per year.

Beginning June 15, 2018, the preferreds are callable on each dividend payment date.

The offer saw extremely strong demand, chief financial officer Jeanette Wong said in a news release, and the bank issued the preferreds in order to augment its tier I regulatory capital base.

DBS Bank is a financial services group based in Singapore.

Noble Group plans dollar deal

Singapore's Noble Group will begin marketing a dollar-denominated offering of five-year fixed-rate senior notes (Ba1/BB+/BBB-) next week in Asia, Europe and the United States.

Citigroup and JP Morgan are the physical bookrunners for the debt refinancing deal from the Hong Kong-based commodities trading company.

"The primary is getting more active, but it's nothing compared to what's going on in high grade, which is just a flood," a syndicate source commented late Thursday afternoon.

"People have surfaced from earnings blackouts, and they figure this is as good a market as you can expect for a while."

This official concurred that emerging markets debt has been doing well recently, but added that since a lot of emerging markets money is now in local markets, softness in those markets is weighing on the asset class.

Asia quiet, grinding tighter

A trader who focuses on Asian debt said that the magnitude 7.9 earthquake which has devastated parts of China has yet to impact emerging markets debt.

"There was some concern in the Chinese property sectors initially, and there was some selling on the back of that," the trader said.

The source added that Chinese sovereign CDS widened out a little relative to some peers, notably Korea and Malaysia. However the widening was not substantial.

"I don't think the market has reacted yet," the trader said.

"But at the same time the market is still waiting to discover the true ramifications and long-lasting effects.

The source also mentioned that there are market-friendly Chinese companies which have voluntarily made disclosures.

"Town Gas China came forward and said that most of its natural gas pipelines were intact, although they did see some leakage here and there," the trader mentioned.

Elsewhere in Asian debt, high beta names were very quiet, according to the source, who added that they slowly ground tighter on Thursday.

The trader noted that Pakistan bonds sold off a couple of points after its ratings were cut by Standard & Poor's on Wednesday, with Pakistan's long-term foreign currency debt rating lowered to B from B+ and its long-term local currency rating to BB- from BB,

Pakistan credit default swaps were 30 bps wider on Thursday, the trader said.

Petrobras corners rig-market

Meanwhile in Latin America, the market was buzzing with assertions that Brazil's Petrobras has cornered the deep-sea oil rig market.

One market source said that Petrobras has leased about 80% of the world's 21 deepest-drilling offshore rigs, putting upward pressure on the prices of the remaining rigs.

The source said that this aggressive acquisition of oil rigs began as early as 2004.

A source in a hedge fund spotted the Petrobras 9 1/8% notes due 2013 at 120¼ bid late Thursday, up from 118 7/8 bid the previous day, and commented that it was a pretty big move.

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