Ukraine bonds down after Russia seizes Ukrainian navy ships; EM debt mostly quiet after U.S. holiday

By Rebecca Melvin

New York, Nov. 26 – Selling hit some of Ukraine’s bonds and spreads were sharply wider on Monday as investors reacted to news that Russia seized three Ukrainian navy ships and wounded six sailors on Sunday. The escalation of tensions caused Ukraine’s Parliament to vote on Monday to impose martial law for 30 days in areas bordering Russia.

International leaders decried Russia’s action, with ambassadors from the United States, France and Britain among others calling on Russia to release the ships and crew and to desist in actions that were deemed reckless and in violation of Ukraine’s sovereignty.

The conflict occurred near annexed Crimea in the Kerch Strait between the Black and Azov Sea. Russia annexed Crimea in 2014 following a referendum and administers it as two federal subjects of Russia, but Ukraine and the majority of international governments still consider Crimea an integral part of Ukraine.

Ukraine’s $750 million of 9% five-year bonds, which priced four weeks ago, were quoted at 96.13, which is down from 100.3 on Oct. 26, the day after pricing at par.

A $1.25 billion sister tranche of 9¾% notes due 2028 dropped below the mid-90s to 94.75, according to a market source.

Ukraine’s older 7¾% notes due 2027 were seen lower to about 85.20 from 87.15 previously.

Ukraine bond spreads widened by 40 basis points to 50 bps, and Ukraine’s five-year credit default swaps moved out to 485 bps from 462 bps last week.

Overall, emerging debt was mostly quiet despite a rally in global stocks as investors stepped back into buying shares after a long holiday weekend in the United States for Thanksgiving.

Positive sentiment early in the session faded later in the day as investors worried about the Central and Eastern Europe region and Latin America debt remained in the crosshairs.

Argentina was weak on Monday with the Argentine peso sinking further into uncharted territory. Meanwhile, Argentina’s 7 1/8% bonds due 2117, or its century bond, was seen at 72.5 bid, 75.35 offered. Less than a month ago on Oct. 31, the century bond was 88.

Elsewhere, word emerged regarding two China lenders that issued floating-rate notes. Agricultural Development Bank of China Ltd. issued €500 million of three-year floating-rate green notes (expected rating: A+) at par to yield Euribor plus 48 basis points, and China’s Shanghai Pudong Development Bank Co. Ltd. sold $300 million floating-rate notes due 2021 at par to yield Libor plus 87 bps.

The Regulation S notes priced by Agricultural Development Bank were led by Bank of China, Standard Chartered Bank, Bank of Communications and Credit Agricole CIB as joint global coordinators, bookrunners and lead managers. Bocom International, Agricultural Bank of China Ltd. HK Branch, ABC International, ICBC (Asia), HSBC, Mizuho Securities, Commerzbank, Citigroup and JPMorgan were the joint bookrunners and joint lead managers.

The notes are expected to be listed on the Hong Kong Stock Exchange and the Luxembourg Green Exchange.

Based in Beijing, the commercial bank has branches in mainland China, Hong Kong and Singapore.

Lead bookrunners of the Shanghai Pudong Development Bank deal were Shanghai Pudong Development Bank, Singapore Branch; DBS Bank Ltd.; Agricultural Bank of China Ltd., Singapore Branch; China Construction Bank Corp., Singapore Branch; Oversea-Chinese Banking Corp. Ltd.; United Overseas Bank Ltd.; Industrial and Commercial Bank of China Ltd., Singapore Branch; Haitong International Securities (Singapore) Pte. Ltd.; SPDB International Capital Ltd.; Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch; Citigroup Global Markets Ltd.; Standard Chartered Bank; Bank of China Ltd., Singapore Branch; HSBC, Singapore Branch; and CIMB Bank Bhd.

Listing of the notes is expected to take effect on Nov. 27.

The lender is based in Shanghai.

Stock markets rallied and oil prices recouped some ground after stock and bond markets were closed on Thursday for Thanksgiving and bond markets remained closed on Friday.

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