Petronas, Panama, Millicom sell notes; Russia, Turkey, Asia weaken; Braskem tied to scandal

By Christine Van Dusen

Atlanta, March 11 – Malaysia’s Petroliam Nasional Bhd. (Petronas), Panama and emerging markets-focused Millicom International Cellular SA sold notes on Wednesday as Russia’s bonds opened 3 basis points wider.

The move in Russia’ spreads was driven by the move in rates, the continuing decline in oil prices and concern about fighting in Ukraine, a London-based analyst said. Also widening as a result of oil prices were bonds from Kazakhstan.

Turkey weakened as well, as investors remained worried about the strength of the lira, which has been tested by a stronger dollar and the prime minister’s assertion that rates may continue to fall.

“We are concerned that Turkey may well remain under pressure in the lead-up to next week’s rates decision,” he said. “There was, however, some good news, with the Central Bank changing the reserve requirement conversion rates, which should provide $1.5 billion of liquidity.”

This should strengthen the lira, he said.

“But clearly the market is focusing on the political pressure to raise rates instead,” he said.

In response, Turkish bonds opened about 2 bps wider on Wednesday.

Bonds from Central and emerging Europe were also wider on Wednesday but still managed to outperform others in the asset class, he said. Euro-denominated paper outperformed dollar-denominated paper.

In trading from Asia, most credits were weaker amid a general risk-off tone, a London-based trader said.

“The strong U.S. dollar continued to put pressure on local currencies while real-money accounts are trimming EM exposure,” he said.

Chinese corporates widen

High-grade bonds from Asia closed Wednesday 3 bps to 8 bps wider on light flows, the trader said, and oil companies from China finished 3 bps to 5 bps wider.

“Seen good demand in China high-grade property names,” he said. “In the high-yield space, China property companies closed ¼ point to ½ point lower.”

Asian sovereigns mostly widen

Among sovereigns in Asia, India’s bonds were a couple of basis points wider while Philippines continued to outperform, the trader said.

“Philippines’ 2040 traded up from 103 to highs of 103 7/8, then closed at 103¾ bid, 104 offered,” he said. “The curve was ¼ to ½ pt higher.”

The Indonesia curve, which saw sellers overnight, closed Wednesday unchanged to a ¼ point lower, he said.

Oro Negro to restructure debt

From Latin America, Mexico-based oil and gas company Oro Negro Impetus Pte. Ltd. announced that it is working on a restructuring proposal to avoid default, according to a report from Schildershoven Finance BV.

“The company will face a $175 million maturity of debt in December,” the report said. “Additionally, the company has $725 million in bonds used to finance the construction of eight oil platforms.”

Given Oro Negro’s net leverage, “it will be difficult for the company to service its debt in the current economic environment,” the report said. “We do not recommend that investors increase investments in Mexico’s oil service industry, as the situation in the industry is challenging.”

Braskem suffers

In other news from Latin America, banks from Colombia took a hit into the close on Wednesday, a New York-based trader said.

Brazil-based Braskem SA suffered the most, however, after a report tied the petrochemical company to the corruption scandal involving Petroleo Brasileiro SA.

That sent the curve plummeting, he said, though the bonds did manage to recover a bit into the close.

Sharjah bank issue ticks up

Sharjah Islamic Bank PJSC’s new 2.843% notes due 2020 that priced at par opened on Wednesday between 3 cents and 8 cents above reoffer, a trader said.

The notes came to the market at a spread of mid-swaps plus 110 bps, following talk in the 125 bps area.

Abu Dhabi Islamic Bank, Al Hilal Bank, Dubai Islamic Bank, Emirates NBD Capital, HSBC, KFH Investment, Noor Bank and Standard Chartered Bank were the bookrunners for the Regulation S deal.

“The new SIB did well on local topping-up of allocations and scarcity of the name, closing at 100¼ bid, 100 3/8 offered after having reached 100½ early,” he said.

Middle East in focus

Other bonds from the Middle East were mixed on Wednesday morning, another trader said, though spreads were generally wider as a result of the rates move.

“Another tricky day, with some paper around,” he said.

Saudi Electricity Co. bonds were active during the session, with some buying of the long end into the close, he said.

“Perpetuals have paused,” he said.

Big deal from Petronas

In its new deal, Malaysia-based state oil company Petronas priced a downsized $3.75 billion of notes due in seven, 10 and 30 years, a syndicate source said.

The company dropped a fourth tranche, which would have been a five-year issue of Islamic bonds that was talked in the Treasuries plus 135 bps.

The $750 million notes due 2022 priced with a 3 1/8% coupon.

The $1.5 billion notes due in 10 years priced with a 3½% coupon.

And the $1.5 billion 4½% notes due in 30 years priced at a yield of Treasuries plus 190 bps, following talk at 220 bps.

BofA Merrill Lynch, CIMB and Deutsche Bank were the bookrunners for deal.

Other details were not immediately available on Wednesday.

Issuance from Millicom

Millicom International Cellular priced $500 million 6% notes due in 2025 (Ba2//BB+) at par to yield 6%, according to a company announcement.

The notes were talked at a yield in the 6¼% area.

Joint bookrunner BNP Paribas will bill and deliver. Citigroup, Goldman Sachs International and JPMorgan were also joint bookrunners for the Rule 144A and Regulation S deal.

The notes come with five years of call protection. However a special call provision allows the issuer to redeem 10% of the notes annually at 103 during the non-call period.

The proceeds will be used to redeem the Telemovil Finance 8% senior notes due 2017, as well as to fund capital expenditures, and for general corporate purposes.

Millicom is a Stockholm-based telecommunications and media company that operates in Latin America and Africa.

Panama prints notes

In another new deal, Panama priced $1.25 billion notes due March 16, 2025 at 99.857 to yield 3.889%, or Treasuries plus 178 bps, a market source said.

The notes were talked at a spread in the 200 bps area.

BofA Merrill Lynch and Deutsche Bank were the bookrunners for the Securities and Exchange Commission registered-deal.

The proceeds will be used for general budgetary purposes and for liability management transactions.

Teva, Egypt to issue bonds

Israel’s Teva Pharmaceutical Industries Ltd. is planning to issue euro-denominated notes, according to a company filing.

The proceeds from the Regulation S deal will be used for general corporate purposes.

And Egypt is looking to issue $1.5 billion of notes in two tranches as soon as April, a market source said.

No other details were immediately available on Wednesday.

Socar deal ahead

The State Oil Co. of the Azerbaijan Republic (Socar) will issue €600 million of notes due March 18, 2022, according to a company announcement.

Deutsche Bank, Citigroup, ING and JPMorgan are the bookrunners for the deal.

Socar is a state-owned oil and gas company based in Baku, Azerbaijan.

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