Burgan Bank advances deal; higher oil prices keep EM firm; Emaar ahead; KDB seeks issuance

By Christine Van Dusen

Atlanta, Sept. 6 – Kuwait’s Burgan Bank SAK advanced a new deal on a firm Tuesday for emerging markets assets, with higher oil prices and stronger currencies after the Labor Day holiday in the United States.

“We had an unsurprisingly calm start into the week, with little news and trading flow yesterday aside from comments from the G20 summit in China,” a London-based analyst said. “Yesterday’s announcement by Saudi Arabia to issue a ‘significant’ joint statement with Russia has caught the oil market off-guard.”

Brent crude prices climbed on the news, even though “the final joint agreement to establish a working group fell somewhat short of more pronounced expectations,” he said. “While Saudi Arabia’s energy minister said that there was no need to freeze production now, market participants are still hoping that the collaboration between two of the leading OPEC and non-OPEC producers will lead to a more far-ranging deal at the International Energy Forum in Algeria later this month.”

By Tuesday morning, emerging markets bonds were seeing support from a sell-off in rates, the analyst said.

“Undoubtedly, today already marks the busy season for European investment grade primary market activity, with a bunch of deals announced this morning, but it has remained calm in [emerging markets].”

In trading, dollar-denominated sovereign bonds from Asia were mixed on Tuesday, with Indonesia’s 10-year notes up 24 basis points, according to a report from Schildershoven Finance BV.

Malaysia’s 10-year notes were down 16 bps, and China’s were lower by 74 bps, the report said.

“Fairly active day, with rates rallying into the close back to 1.55%,” a London-based trader said. “Spreads, and the market in general, are trading well.”

Slow trading for Lat-Am

From Latin America, trading was slow on Tuesday, though the tone was improved, a New York-based trader said.

Chilean high-grade names saw more demand, with some corporates moving higher, while Mexican high-grade continued to trade up.

Flows remained for Mexico-based Cemex SAB de CV, he said, while corporates from Peru were mostly quiet.

“Banks have found their way higher the last week or so,” he said.

Brazil probe continues

In other news from Latin America, the corruption investigation continued in Brazil with the police raiding the offices of J&F Investimentos SA and pulp producer Eldorado Brasil Celulose SA as part of a probe into pension funds that are accused of fraudulent and reckless investments.

“According to the first details on this case, prosecutors have the evidence the Brazilian pension funds illegally invested money in Eldorado,” Schildershoven said in a report. “Investors should be prepared for volatility in the nearest future.”

Middle East in focus

Notes from Turkey opened with a better tone on Tuesday, a trader said.

“Cash is firm, with buyers on the 2023s, 2026s and 2043s, which are all outperforming,” he said.

Sovereign bonds from Qatar were active, with the 2021s ending the European session at 101 bid, 101 1/8 offered, a trader said.

The recent issue of bonds from Emirate of Sharjah – $500 million 3.084% notes due 2021 that priced at par to yield mid-swaps plus 185 bps – traded Tuesday at 99.90 bid, 100.05 offered.

HSBC, Citigroup, Standard Chartered, Emirates NBD, First Gulf Bank, Dubai Islamic Bank, Kuwait Finance House and Bank ABC were the bookrunners for the Regulation S deal.

Notes from Dubai’s DP World were popular, particularly the 2023s, he said.

Burgan gives guidance

Kuwait’s Burgan Bank set initial talk in the mid-swaps plus low-to-mid-200 bps area for a benchmark-sized offering of dollar-denominated notes due in five years, a market source said.

HSBC, Standard Chartered, National Bank of Abu Dhabi, Emirates NBD and Societe Generale are the bookrunners for the deal.

Burgan Bank is a Sharq-based lender and subsidiary of Kuwait Projects Co. Holding KSC (Kipco).

“Given that it is an infrequent issuer, it probably won’t have the lines, limits and back book demand that a bigger, more well-known and conventional issuer will have from the region,” a trader said. “I suspect you’d need a pick-up over the wider and smaller-type issuers in the region, and some sort of new issue concession that other banks don’t offer.”

But overall, the issue is “welcome,” he said.

Emaar on deck

Investors were also looking ahead to the issue expected from Dubai-based property developer Emaar Properties, which set out on Sept. 4 for a roadshow to market a dollar-denominated issue of Islamic bonds, a market source said.

Standard Chartered, Emirates NBD, National Bank of Abu Dhabi, First Gulf Bank, Dubai Islamic Bank PJSC, Union National Bank, Mashreqbank, Noor Bank and Bank ABC are the bookrunners for the Regulation S deal.

“Emaar’s 2019 traded very tight in the August squeeze and is very high-dollar price,” a trader said. “Given that Emaar has the dual rating, it will appeal to a wider universe.”

Issue size will play a big part, he said, in that the deal could “come tight” if it is $500 million.

“Either way, they are an infrequent issuer, they are a key component of the Dubai story, they are investment-grade rated, the credit had a maturity last month,” he said. “The [Gulf region] is about box ticking, and this one ticks a vast percentage of them.”

KDB to issue two tranches

Korea Development Bank is planning to issue two tranches of dollar-denominated notes, according to a company filing.

BNP Paribas, Goldman Sachs, HSBC, JPMorgan, KDB Asia, Mirae Asset Daewoo, Standard Chartered Bank and UBS are the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general operations.

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