Russia markets first deal post-sanctions; light inquiry, volumes for EM; Marfrig on roadshow

By Christine Van Dusen

Atlanta, May 23 – Russia on Monday set talk for a new eurobond – its first since Ukraine-related sanctions were imposed in 2013 – during a session that saw limited inquiry and volumes for many emerging markets names.

“Very light ... with a bit of weakness creeping in after Friday’s ‘rebound,’” a New York-based trader said at midday. “No follow-through at all, after losing steam into Friday’s close as well.”

The curve for Brazil-based Vale SA was “in neutral, certainly not getting any help from some the more liquid Brazilian corporates or sovereign cash,” he said. “Most high-grade credits are trading sideways to slightly lower.”

Institutional investors seem to lack the conviction to add, he said, but “are still constructive overall,” he said. “Chile and Mexico high-grade continued to hold onto their gains, the strongest after the run higher in March and April.”

Meanwhile, banks and corporates from Colombia were fading, with little selling to speak of, he said.

“The new issue pipeline in Lat-Am remains light,” he said.

The recent issue of notes from Peru’s Kallpa Generacion SA – $350 million 4 7/8% notes due 2026 that priced at 99.258 to yield 4.97%, or Treasuries plus 312.5 bps – continues to trade well, he said.

Credit Suisse, Credicorp, Morgan Stanley and Scotiabank were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used to repay existing indebtedness and for general corporate purposes.

“Traded well out of the gate,” he said. “Evidence of a well-time and well-placed deal in a market that has been fairly tricky the last month.”

Russia gives guidance

For its planned issue of benchmark-sized and dollar-denominated notes due in 10 years, Russia set initial price guidance at 4.65% to 4.9%, a market source said.

The deal – with VTB Capital as the sole bookrunner, given that Western banks were steering clear – received a lot of attention on Monday, with demand reportedly reaching more than $5 billion.

The book was expected to close on Monday but was extended to Tuesday, to leave time for more investors to participate, the market source said.

The sovereign says the proceeds will not go toward any sanctioned entities.

“Given the ‘be mindful’ comments out of the U.S. and E.U. it’s no surprise that this is a VTB sole lead deal,” a trader said. “Speaking to investors the headline number looks OK versus the curve.”

But with little information on who will trade the deal and who the paying agent will be, there are “lots of unknowns,” he said.

Lat-Am in focus

Taking another look at Latin America, credit moved wider and lower on Monday afternoon, as the “market gives back some of the gains from the rebound on Friday,” another trader said.

Brazil’s five-year credit default swaps spreads ended the day at 362 bps from 350 bps, while Mexico’s moved to 90.35 from 90.75.

“Cash prices opened soft and drifted lower throughout the day, with levels at or near the day's lows,” he said. “Lat-Am high-yield finishes mixed on the day.”

Venezuela saw its 2027s trade at 42.25 from 42.50, PDVSA’s 2017s moved to 66.15 from 67.25, and Argentina’s Bonar 2024s closed unchanged at 109.50.

The sovereign’s 2026s moved down a touch, to trade at 103.10 from 103.25.

“Flows extremely light on the day, with Brazil and Colombia seeing the majority of the trading activity that did happen,” he said.

Marfrig on roadshow

In other news, Brazil’s Marfrig Global Foods SA is on a roadshow for a possible issue of new senior notes that are being offered alongside a tender offer, a market source said.

Banco do Brasil, Bradesco, HSBC, Morgan Stanley and Santander are leading the marketing trip, which started Monday and ends Tuesday.

The company is offering to purchase for cash the outstanding 9 5/8% notes due 2016 issued by Marfrig Overseas and the 9 7/8% notes due 2017 issued by Marfrig Holdings. There is also a capped tender offer for the 8 3/8% notes due 2018 issued by Marfrig Holdings, the 9½% notes due 2020 and the 2016, 2017 and 2018 notes issued by Marfrig Overseas.

Marfrig is a Sao Paulo-based food processing company.

Romania does deal

On Friday, Romania sold €1 billion 2 7/8% notes due in 2038 at a yield of 2.992%, a market source said.

JPMorgan, Citigroup, RBI, Societe Generale CIB and UniCredit were the bookrunners for the Regulation S deal.

Other details were not immediately available on Monday.

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