EM remains under pressure, but China oil outperforms; Sagicor ticks up; eHi cancels deal

By Christine Van Dusen

Atlanta, Aug. 5 – Emerging markets bonds on Wednesday were steady but mixed in response to declining oil prices, weakness in U.S. Treasuries and ahead of non-farm payroll data, set for release at the end of the week.

“The opening still feels steady versus yesterday, but the macro [picture] remains soft,” a London-based trader said. “High-yield was offered and defensive credits and short-duration were holding in still. Oil importers are outperforming.”

The tone improved for Asian debt on Wednesday, though performance remained mixed, with investment-grade cash bonds moving wider or narrower by 3 basis points, a London-based trader said.

“Had some real-money buyers and short-covering, which drove the China [oil companies] and recent issues 3 bps to 5 bps tighter,” he said.

Bonds from Malaysia “rebounded nicely as oil stabilized,” he said, and closed 5 bps tighter.

“Korea underperformed, 3 bps to 5 bps wider, with sellers in the 10-year bucket,” he said.

At the end of the New York session, sovereigns were “a bit soft,” another trader said, with Vietnam’s 2024s, Philippines’ 2034s and Indonesia’s 2043s and 2045s trading lower.

Looking to Latin America, the new issue of 8 7/8% notes due 2022 that Sagicor Financial Corp. priced Tuesday at 98.727 to yield 9 1/8% saw small volumes after the open on Wednesday, a New York-based trader said.

The notes, which came to the market via JPMorgan and Scotiabank in a Rule 144A and Regulation S deal, traded at par on Wednesday.

Lat-Am slightly tighter

Low-beta spreads from Latin America finished the day mostly unchanged to a little bit tighter, another trader said.

Brazil’s five-year credit default swaps spreads were unchanged at 304 bps, while Mexico’s moved to 136 bps from 138.50 bps.

Bonds from Venezuela moved lower on weaker oil prices, he said, and PDVSA’s 2017s moved to 66 from 66.59.

The sovereign’s 2027s were seen at 40, versus Tuesday’s 41¼.

Petrobras plans IPO

Brazil-based Petroleo Brasileiro SA (Petrobras) received some attention on Wednesday, after announcing plans to sell about 25% of its fuel distribution unit via an initial public offering.

“That may become the largest IPO for the country in more than two years,” according to a report from Schildershoven Finance BV. “This is part of the company’s plan to reduce leverage, via the sale of assets.”

This move is expected to “have some moderate positive effect on the oil producer’s bonds,” the report said.

Damac tightens

From the Middle East, Dubai-based Damac Real Estate Development Ltd.’s 4.97% five-year notes that priced at par were 30 bps tighter on Wednesday, a trader said.

“That’s now 90 bps tighter on the month,” he said.

Barclays, Citigroup and Deutsche Bank were the joint global coordinators. The three banks – along with Abu Dhabi Islamic Bank, Dubai Islamic Bank, Emirates NBD Capital and National Bank of Abu Dhabi – were also joint lead managers for the Regulation S deal.

Ukraine fluctuates

Bonds from Ukraine have been fluctuating so far this week amid limited activity, said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“On the restructuring front, it looks like [the Finance Ministry’s] and bondholders’ positions are converging gradually and we may see a deal inked this or next week,” he said. “The rally in quasi-sovereign banks continues to amaze market participants.”

State Export-Import Bank of Ukraine’s (Ukreximbank) 2015s have been trading near or above 87, he said.

“It’s quite impressive how the market came to terms with high cash prices and is refocusing on the yield,” he said.

Chinese corporate cancels deal

China’s eHi Car Services Ltd. has canceled plans for a dollar-denominated issue of notes, a market source said.

Current market conditions, as well as weak demand, led to the deal’s downfall, he said.

Deutsche Bank and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds were to be used for capital expenditures and other general corporate purposes, including refinancing of outstanding indebtedness and enhancing capital structure, according to a company announcement.

eHi is a car services and car rentals provider based in Shanghai.

China Oceanwide draws orders

The new issue of notes from China Oceanwide Holdings Group Co. Ltd. – $400 million 9 5/8% notes due 2020 that priced Tuesday at par – drew a final order book of $775 million from 58 orders, a market source said.

About 95% of the orders came from Asia and 5% from Europe, with private banks picking up 33% and fund managers and banks taking up 67%.

Citic CLSA and UBS were the bookrunners for the Regulation S deal.

The proceeds will be used for overseas general corporate purposes, including project development.

In trading on Wednesday, the notes were seen at 99¾ bid.

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