First Gulf Bank prices bonds; Ukraine ceasefire fails; bailout talks in Greece fall apart

By Christine Van Dusen

Atlanta, Feb. 17 – Abu Dhabi’s First Gulf Bank PJSC sold notes on Tuesday while emerging markets bond spreads moved slightly wider as the ceasefire in Ukraine failed to hold and the European Union increased sanctions against Russia.

“We don’t imagine too many investors are surprised by the ongoing fighting in Eastern Ukraine,” a London-based analyst said. “The situation appears similar to the previous ceasefire last year, with frequent violations from the start.”

Investors may have been surprised, however, by the European Union’s decision to add new people and entities to the list of sanctions, he said.

“Nothing that should affect our markets, however,” he said.

Russia’s credit default swaps spreads widened 1 basis point on this news and a court’s ruling that Ural-Invest should pay AFK Sistema more than $1 billion in damages. Ural-Invest in 2009 sold a 70% stake of OAO Bashneft to Sistema, privatizing Bashneft. It was later determined that Bashneft should never have been privatized and that all subsequent share transactions were illegal.

Sistema was forced to transfer its stake in Bashneft to the state and incurred losses that, this week, the courts determined Ural-Invest should help cover.

Investors were also paying attention to Greece, where talks about the sovereign’s debt crisis and bailout plan fell apart.

“Activity was still limited first thing this morning after yesterday’s holiday,” the analyst said. “Clearly a lot of investor focus on Greece as well, following the acrimonious end to the meeting yesterday.”

Meanwhile, bonds from Asia were mostly unchanged on Tuesday and saw better buyers, even amid negative headlines out of Europe, a London-based trader said.

Asia unchanged, some demand

Demand was seen for high-grade property companies and technology corporates from China, including Alibaba Group Holding Ltd.’s 2019s and 2021s, the trader said.

“India closed unchanged, with two-way flow in the five-year financials,” he said. “The short end is still very well bid.”

Bonds from Korea were also unchanged but saw onshore demand for the Export-Import Bank of Korea (Kexim) curve, he said.

Kaisa sees selling

In other trading from Asia, Kaisa Group Holdings Ltd. remained in focus after its stock resumed trading. The company’s bonds closed down about ½ point to 1½ points with retail investor selling, a trader said.

“High-yield sovereigns are slightly better, with U.S. Treasuries rallying in the morning,” he said. “The Philippines curve was up ½ point to ¾ point at midday and leaked lower to close unchanged to ¼ point higher in the long end. The Indonesia curve closed unchanged to a ¼ point higher.”

First Gulf Bank prints notes

In its new deal, Abu Dhabi-based First Gulf Bank priced $750 million 2 5/8% notes due Feb. 24, 2020 at 99.549 to yield mid-swaps plus 100 bps, a market source said.

The notes were talked at a spread of 100 bps to 105 bps.

Citigroup, Deutsche Bank, First Gulf Bank, HSBC and ING were the bookrunners for the Regulation S deal.

“Given the success of the recent (National Bank of Abu Dhabi PJSC) issue – almost 20 bps tighter since issuance – the general lack of new supply out of the Middle East and the generally low liquidity elsewhere in the First Gulf curve, we expect this deal will be popular with investors,” a trader said.

Solusi deal draws orders

The recent issue from Indonesia-based telecommunications tower operator and owner PT Solusi Tunas Pratama Tbk – 6¼% five-year notes that priced at par – drew a final order book of about $1.1 billion from 125 accounts, a market source said.

BNP Paribas, ING, JPMorgan, Standard Chartered Bank and HSBC were the bookrunners for the Regulation S deal.

The proceeds will be used for refinancing existing indebtedness.

About 73% of the orders came from Asia and 27% from Europe, with 71% from fund managers, 15% from private banks, 12% from banks and 2% from pension funds.

© 2015 Prospect News.
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