Vedanta, Slovakia, Mexico's RCO sell bonds; 'ugly session' with weak tone for EM

By Christine Van Dusen

Atlanta, May 23 - Emerging markets-focused Vedanta Resources plc, Slovakia and Mexico's Red de Carreteras de Occidente SAB de CV (RCO) sold notes on a weak, challenging Thursday with limited liquidity for emerging markets assets.

"A couple of sticky bonds held in pretty well, but for the most part it was a pretty ugly session for the market today," a London-based trader said. "Market feels between a rock and a hard place at the moment."

The bonds that managed to perform in spite of the market backdrop included Saudi Electricity Co.'s 2017s, Qatar Islamic Bank, Dubai Electricity and Water Authority's 2016s and 2018s and Dubai's 2014s and 2016s.

"Tone is weak, for the most part, and liquidity dire," the London trader said. "Tricky market. A UK bank holiday is coming up Monday, so suspect that liquidity - what little there is - will drop right off tomorrow afternoon."

The new issue of 5¾% perpetual notes from Dubai-based Emirates NBD that priced at par saw a first print of 99¾ in trading, a trader said. The notes then moved to 991/2, then 99¼ and 99.

"The low print I traded was 983/4," he said. "Then it bounced up to 991/2."

The high print so far has been 1001/4.

"Carbon copy of their 2023s," he said. "The bond gets squeezed in tighter, never initially performs in the secondary due to very poor placement, but over time will probably perform OK."

Meanwhile, China Properties Group Ltd., India's Canara Bank, Brazil's Minerva SA and OJSC Russian Agricultural Bank mandated bookrunners for new deals. And Mexico's Grupo Famsa SAB de CV set price talk, Majid Al Futtaim Holdings LLC (MAF) set a roadshow and Indonesia looked at issuing Islamic bonds.

Vedanta does deal

In its new deal, emerging markets-focused Vedanta Resources priced $1.7 billion of bonds due 2019 and 2023, with both tranches coming to the market at par, a market source said.

The deal included $1.2 billion 6% notes due 2019 that priced to yield 6% and $500 million 7 1/8% notes due 2023 that priced at par.

BofA Merrill Lynch, Barclays, Citigroup, JPMorgan, Royal Bank of Scotland, Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used to refinance a portion of the bank debt that Vedanta entered into to finance its acquisition of a controlling stake in Cairn India, which will result in a cancellation of Vedanta's commitments under a bridge facility, and for general corporate purposes, according to a company announcement.

Vedanta Resources is a London-listed natural resources company that produces aluminum, copper, zinc, lead, silver, iron ore, oil, gas and commercial energy. Vedanta has operations in India, Zambia, Namibia, South Africa, Ireland, Liberia, Australia and Sri Lanka.

Vedanta draws orders

The final book for Vedanta's new 2019 notes was $7.2 billion from 423 accounts, with 56% from the United States, 23% from Asia and 21% from Europe, a market source said.

Asset and fund managers picked up 73%, private banks 13%, sovereign wealth and pension funds 8%, insurance 4% and banks 2%.

The 10-year notes attracted about $3.3 billion from 275 accounts, with 50% from the United States, 26% from Europe and 24% from Asia.

Asset and fund managers accounted for 76%, private banks 11%, sovereign wealth and pension funds 9%, insurance 3% and banks 1%.

Slovakia prices notes

Slovakia priced €1 billion notes due 2018 at a spread of mid-swaps plus 65 basis points, a market source said.

KBC, Raiffeisen Bank and Intesa/IMI were the bookrunners for the Regulation S deal.

And Mexico-based highway operator RCO sold Ps. 7.5 billion 9% notes due 2028 at par to yield 9%.

The notes were talked at a yield in the mid-9% area.

Other details were not immediately available on Thursday.

Corporates pick bookrunners

Hong Kong-based China Properties Group has mandated BofA Merrill Lynch to lead a roadshow starting May 27, a market source said.

An issue of notes may follow.

And India's Canara Bank has picked BofA Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Agricole, HSBC and JPMorgan for a roadshow beginning on May 27.

The Regulation S roadshow will be held in Singapore, Hong Kong and London.

Famsa gives guidance

Mexico-based retail company Grupo Famsa set price talk in the 7½% area for its upcoming issue of dollar-denominated notes due in seven years, a market source said.

Credit Suisse and Citigroup are the bookrunners for the deal.

And Brazilian food processing company Minerva has mandated BTG Pactual, HSBC and Morgan Stanley as bookrunners for a dollar-denominated issue of perpetual notes, a market source said.

The roadshow - to be held in Asia, Europe and the United States - will begin on May 27.

A Rule 144A and Regulation S deal is expected to follow.

Other deals ahead

Moscow-based Russian Agricultural Bank has mandated JPMorgan, RBS and VTB Capital for a roadshow to market an issue of bonds, a market source said.

The marketing trip will begin on May 28.

And Indonesia is looking to issue Islamic bonds in September or October of this year, a market source said.

No other details were immediately available on Thursday.

United Arab Emirates-based property developer Majid Al Futtaim will market an issue of perpetual hybrid notes in a roadshow with Goldman Sachs and HSBC, a market source said.

The marketing trip for the Regulation S issue will begin on Sunday and take place in the United Arab Emirates, Asia and Europe.

In response, the company's existing 5¼% notes due in seven years, which priced at par, have been well offered lately, the London trader said.

The notes priced at a spread of 415.6 bps over mid-swaps via JPMorgan, National Bank of Abu Dhabi, Barclays Capital, Standard Chartered and UBS in a Regulation S transaction.

"The reason for MAF being well offered is revealed," he said.

In other news, International Petroleum Investment Co.'s (IPIC) 5½% dollar notes due in 2022 traded Thursday at 115¾ bid, 116½ offered, wider by 14 bps, a trader said.

African issues trade down

From Africa, Tunisia's 4½% euro notes due 2020 - sighted Wednesday at 95¾ bid, 97¾ offered - ticked down to 95 bid, 97 offered on Thursday.

Egypt's 5¾% 2020 dollar notes traded Thursday at 89 bid, 94 offered. On Wednesday the notes were quoted at 90¼ bid, 93¼ offered.

Senegal's 8¾% notes due 2021 were mostly unchanged on Thursday at 119½ bid, 1211/2.

And Morocco's 5½% 2042 notes traded Thursday at 97.87 bid, 99.37 offered. The notes were seen Wednesday at 101 bid, 102½ offered.

On Wednesday, the sovereign priced a $500 million tap of its notes due 2022 and a $250 million tap of its notes due 2042 a market source said.

The 2022 notes carried at 4¼% coupon and priced at 100.263 to yield Treasuries plus 220 bps.

The 2042 notes carried a 5½% coupon and priced at 97.464 to yield Treasuries plus 237.5 bps.

Barclays, BNP Paribas, Citigroup and Natixis were the bookrunners for the Rule 144A and Regulation S deal.

Russian issuers shelve deals

Russia's Mobile TeleSystems OJSC has postponed its planned offering of ruble notes due May 30, 2018 (Ba2/BB/BB+), a market source said.

The notes were talked at a yield in the 8¼% area.

Gazprombank, JPMorgan and RBS were the bookrunners for the Rule 144A and Regulation S bond offering.

Mobile TeleSystems is a telecommunications provider based in Moscow.

Moscow-based JSC Russian Standard Bank has postponed its planned issue of dollar-denominated notes due in 10½ years (//B), a market source said.

Goldman Sachs and HSBC were the bookrunners for the Regulation S-only deal.

The notes were talked at a yield in the 10% area.

Also from Russia, Renaissance Credit Group printed a $350 million issue of 7¾% notes due 2016 (B2/B/B) at par to yield 7¾%, or mid-swaps plus 720 bps, a market source said.

Goldman Sachs, Raiffeisen Bank and Sberbank CIB were the bookrunners for the Regulation S deal.

Renaissance Credit is a financial services company based in Moscow.

$670 million book for ADCB

The final book for Abu Dhabi Commercial Bank PJSC's $300 million 3 1/8% notes due 2023 that priced 99.757 to yield 3.178%, or mid-swaps plus 220 bps, was $670 million from 62 investors, a market source said.

About 49% of the orders came from the Middle East, 41% from Europe and 10% from Asia.

Funds snapped up 58%, banks 31%, private banks 9% and others 2%.

Standard Chartered Bank was the sole bookrunner for the Regulation S-only deal.

"The ADCB 2023 $300 million deal has fallen into a vortex," a trader said. "That's the problem with sole-led deals. It's been pointed out how cheap it is. I suspect this will take some time to perform, as it was definitely not placed well.

Paul A. Harris contributed to this article.

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