New issues from Beijing Infrastructure, Montenegro, Sappi; Petronas deal gets attention

By Christine Van Dusen

Atlanta, March 12 – China’s Beijing Infrastructure Investment (Hong Kong) Ltd., Montenegro and Sappi Southern Africa (Pty.) Ltd. priced notes on Thursday as the market digested the $5 billion deal from Malaysia’s Petroliam Nasional Bhd. (Petronas) and Latvia and Malaysia contemplated new issues.

In trading, Russian bonds were mostly unchanged on Thursday after widening on Wednesday, a London-based analyst said. And sentiment about Ukraine improved after the International Monetary Fund approved a $17.5 billion aid package for the sovereign.

“Now that the IMF deal is out of the way, we should see Ukraine approach bondholders regarding restructuring talks,” he said.

Turkey’s credit default swaps spreads tightened 6 basis points on Thursday morning on a stronger lira, spurred by positive comments from government ministers and an improvement in the current account deficit, he said.

From Central and emerging Europe, spreads tightened slightly on the move in rates, he said.

Much of the focus in the Asian bond market on Thursday, where high-grade bonds closed mostly unchanged to slightly tighter, was on the new $5 billion and four-tranche deal from Malaysia’s Petronas.

“Deal traded weak during the Asian morning, with all tranches dipping below re-offer, but recovered after London open,” a London-based trader said.

The deal included $1.25 billion 2.707% Islamic bonds that priced at par to yield 2.707%, or Treasuries plus 110 bps, after talk of a 135-bps spread. On Wednesday the company dropped the sukuk tranche, then added it back.

Those notes drew $2.7 billion of orders.

“The five-year sukuk was down to the wides of 115 and to the tights of 108 and then closed 112 bid, 110 offered, unchanged,” he said.

Petronas’ seven-years ‘quiet’

The $750 million 3 1/8% notes due March 18, 2022 that Petronas priced at 99.39 to yield Treasuries plus 130 bps, following talk of a 150 bps spread, drew an order book of $1.5 billion.

“The seven-year deal was rather quiet, with bonds tightly held,” the London trader said. “Closed at 110 bid, 106 offered, 3 bps tighter.”

Petronas draws orders

Petronas’ $1.5 billion 3½% notes due March 18, 2025 that priced at 99.125 to yield Treasuries plus 150 bps, following talk of a 175 bps spread, drew an order book of $4 billion.

“The 10-year was heavy and traded to wides of 160 before bouncing back to reoffer, closing at 153 bid, 150 offered,” he said.

The deal also included $1.5 billion 4½% notes due in March 18, 2045 that priced at 98.767 to yield Treasuries plus 190 bps, following talk at 220 bps, and saw $4.2 billion in orders, a market source said.

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

Asian sovereigns rally

Away from the Petronas deal, high-yield property companies from China moved lower, closing down ¼ point to ½ point, a trader said.

“High-yield sovereigns staged a small rally, along with U.S. Treasuries, into the close,” he said. “The Philippines curve closed ¼ point higher while Indonesia benchmarks closed ½ point higher.”

Lat-Am weakens

From Latin America, bonds had a fairly slow start and spent most of the session a bit weaker before closing amid very thin liquidity, a New York-based trader said.

Colombia’s banks were particularly hard-hit, drifting lower, while Chilean retailer Cencosud SA resisted a decline, he said.

Customer selling slowed and inquiries were more balanced for Corporacion Nacional del Cobre de Chile (Codelco), which widened a bit, he said.

Petrobras suffers

Brazil-based Petroleo Brasileiro SA was once again in the news, this time due to renewed fears of a downgrade, a trader said.

The company’s notes widened between 15 bps and 20 bps. Brazil-based Vale SA, as expected, followed suit, widening another 10 bps to 12 bps, he said.

Meanwhile, bonds from Brazil’s Odebrecht SA continued to struggle, he said, but ended the day unchanged in terms of price.

Beijing corporate prints notes

China’s Beijing Infrastructure Investment – via Eastern Creation II Investment Holdings Ltd. – priced a €500 million issue of 1% notes due March 19, 2018 at 99.768 to yield 1.079%, or mid-swaps plus 95 bps, a market source said.

RBS and Bank of China were the global coordinators for the Regulation S offering. RBS, Bank of China, BNP Paribas, CCB International, ICBC (Asia), HSBC and JPMorgan were the joint bookrunners.

Sappi sells notes

Johannesburg-based paper manufacturer Sappi sold €450 million 3 3/8% notes due 2022 at par to yield 3 3/8%, a market source said.

The notes were talked in the 3½% area.

Credit Agricole, JPMorgan, UniCredit, Citigroup, Erste Group, KBC, RBS and Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used to refinance the company’s €250 million notes due in 2018 and $300 million in notes due 2019.

New notes from Montenegro

Montenegro priced a €500 million issue of notes due in 2020 (Ba3/B+/) at 99.444 to yield 4%, a market source said.

The notes were talked in the 4 1/8% area.

Citigroup, Deutsche Bank, Erste Group and Societe Generale were the bookrunners for the Rule 144A and Regulation S deal.

Other pricing details were not immediately available on Thursday.

ICBC sets talk

Industrial and Commercial Bank of China Ltd. set talk for a two-tranche issue of dollar-denominated notes due in three and five years, a market source said.

The three-year notes were talked at a spread in the Treasuries plus 205 bps area.

The five-year notes were talked at a spread in the 225 bps area.

Citigroup, ICBC Asia, ICBC International, JPMorgan, Morgan Stanley and Standard Bank are the bookrunners for the Regulation S deal.

The proceeds will be used for the acquisition of assets.

Hutchison Whampoa sets talk

China’s Hutchison Whampoa Ltd. set talk for a three- and five-year issue of dollar-denominated notes, a market source said.

The three-year notes were talked at a spread in the Treasuries plus 140-bps area.

The five-year notes were talked in the 150-bps area.

BofA Merrill Lynch and HSBC are the bookrunners for the Rule 144A and Regulation S deal.

Hutchison Whampoa is a Hong Kong-based business conglomerate.

Roadshow for Peru

Peru will set out on March 16 for a roadshow to market a possible issue of notes, a market source said.

BBVA, Deutsche Bank and Morgan Stanley are arranging the marketing trip.

The roadshow will begin in New York and travel to Los Angeles and London before concluding on March 18 in Boston.

Armenia plans roadshow

Armenia has mandated Deutsche Bank, HSBC and JPMorgan to lead a roadshow for a dollar-denominated issue of notes, a market source said.

The roadshow will begin on March 16 and take place in the United States and London.

A Rule 144A and Regulation S issue of notes is expected to follow.

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