Oil prices boost Venezuela, PDVSA; talks with Russia ‘constructive’; roadshows ahead

By Christine Van Dusen

Atlanta, Feb. 6 – The rebound in oil prices made for a strong end to the week for many emerging markets bonds, even as tensions between Russia and Ukraine continued and investors watched to see what would come from related talks.

Russian credit default swaps spreads were 10 basis points tighter on Friday, a London-based analyst said.

“Plenty of focus on meetings in Ukraine,” he said. “The United States will make a decision ‘soon’ on providing lethal arms to Ukraine in what would be a fairly major development in the conflict.”

Friday’s meetings were “constructive,” according to media reports, and were expected to yield some positive headlines.

“[The French and German presidents] travel to Moscow today to meet Putin, reportedly to offer their counter-proposal for a peace deal, although that has raised concerns in Ukraine, who will not be present at the talks,” he said. “We think there is a good chance of some positive headlines out of Moscow today, but would be skeptical about how long-lasting any agreement would be, considering Kiev is not involved and that the rebels have become increasingly aggressive in their rhetoric recently.”

The meeting also raises the stakes, according to a report from Schildershoven Finance BV.

“The fact that the discussion is taking place face-to-face increases the chances that a solution to the Ukrainian crisis will be found,” the report said. “On the other hand, if something goes wrong, it could become a big disappointment for all parties involved and will dramatically worsen the relationship between these countries.”

Lat-Am in focus

From Latin America, bonds from Venezuela and PDVSA were outperformers, with prices up between 1 point and 3 points across the curve, a New York-based trader said.

The boost came from better oil prices as well as an increase in risk appetite, he said. Also contributing to the move was that selling from real-money accounts so far this year has declined.

Cencosud sees action

The day also saw some significant action for Chile-based Cencosud SA’s new two-tranche issue.

The retail company priced a two-tranche issue of $1 billion notes due Feb. 12, 2025 and 2045, with $650 million 5.15% notes due in 2025 pricing at 99.637 to yield Treasuries plus 337.5 bps.

The 6 5/8% notes due in 2045 priced at 99.909 to yield Treasuries plus 420 bps.

“The 2045s were hit in the Street at 100½,” a New York-based trader said. “Volumes are pretty large on the 2025s. There is little depth to any singular bid level on either tranche.”

HSBC and Scotiabank were the bookrunners for the Rule 144A and Regulation S deal.

“Started off strongly but had petered out by mid-morning,” he said. “The 2045s had a rougher day, with moderate Street selling.”

Halkbank trades above reoffer

Looking to Turkey, credit default swaps spreads opened Friday 1 bp tighter and the new issue of 4¾% notes due 2021 from Turkiye Halk Bankasi (Halkbank) traded just above reoffer, a trader said.

The notes priced at 99.562 to yield 4.835%, or mid-swaps plus 322 bps, via BofA Merrill Lynch, Commerzbank, Deutsche Bank, Erste Group, ING and Natixis in a Rule 144A and Regulation S deal.

“Active yesterday,” he said. “Ended the day a little better, overall.”

Meanwhile, bonds from Central and emerging Europe were mostly flat on Friday morning, he said.

Asian bonds firm

Asian bonds on Friday were firm, with high-grade names closing 1 basis point to 3 bps tighter, a trader said.

The new issue of notes from China-based Tencent Holdings Ltd. – $2 billion due in five and 10 years – tightened at the end of the week, he said.

The company priced 2 7/8% five-year notes at 99.797. The notes traded 5 bps tighter on Friday, he said.

The 3.8% 10-year notes that priced at 99.605 also tightened about 5 bps, he said.

Deutsche Bank, Barclays, Goldman Sachs, JPMorgan, ANZ, Bank of China (Hong Kong), BofA Merrill Lynch, China Merchants Securities (HK), Citigroup and Credit Suisse are the managers for the Rule 144A and Regulation S offering.

Oil names, Korea unchanged

Oil corporates from China were unchanged to 2 bps tighter on Friday while financial bonds were about 1 bp to 3 bps tighter, a trader said.

“Korea is generally firmer, with spreads unchanged to a couple basis points tighter,” he said. “India continued to trade firm, with the sector closing 2 bps to 5 bps tighter. Indonesia outperformed, with the long end closing unchanged and the belly up ¼ point to a ½ point.”

Bonds from the Philippines closed a ½ point to 1 point lower, with real-money sellers spotted, he said.

Among property companies from China, Kaisa Group Holdings Ltd.’s notes were unchanged on Friday after investors digested the news that China-based Sunac China Holdings Ltd.’s chairman was buying a 49.25% stake in Kaisa, a trader said.

Sintex on roadshow

India’s Sintex Industries Ltd. is on a roadshow to market a dollar-denominated issue of bonds, a market source said.

Other details were not immediately available on Friday.

The Gujarat, India, company is a provider of plastics and niche textile-related products.

Roadshow ahead

China Financial Services Holdings Ltd. will set out on Monday for a roadshow to market a renminbi-denominated issue of notes, a market source said.

The Regulation S bonds will be issued by subsidiary Golden Bauhinia Investment Holdings Co. Ltd. and guaranteed by China Financial Services and China United SME Guarantee Corp., a third-party guarantor, according to a company announcement.

JPMorgan is the bookrunner for the deal.

The Beijing-based provider of financial services will use the proceeds for the development of the group’s business in Hong Kong and for other general corporate purposes.

Buenos Aires, Angola eye bonds

The City of Buenos Aires is planning to issue bonds, a market source said.

The proceeds will be used to refinance debt.

And Angola is looking to issue up to $1.5 billion of notes, a market source said.

No other details were immediately available on Friday.

Chinese bank draws orders

The final book for China Construction Bank (Asia) Corp. Ltd.’s €500 million 1½% five-year notes was more than €1.5 billion from more than 120 accounts, a market source said.

The notes priced this week at 99.938 to yield mid-swaps plus 120 bps via China Construction Bank, Deutsche Bank and HSBC in a Regulation S deal.

About 35% of the orders came from Asia, 26% from France, 12% from others, 11% from Switzerland, 10% from Germany and 6% from the United Kingdom.

Fund managers picked up 41%, banks 24%, central banks 13%, others 6%, corporates 5%, private banks 5%, hedge funds 3%, insurers 2% and pension funds 1%.

Eskom prints notes

On Thursday, South Africa’s Eskom Holdings SOC Ltd. priced $1.25 billion notes due in 2025 with a yield of 7 3/8%, a market source said.

Deutsche Bank, Rand Merchant Bank and Standard Bank were the bookrunners for the Rule 144A and Regulation S deal.

Other pricing details were not immediately available on Friday morning.

Eskom Holdings is an electricity provider based in Johannesburg.

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