Qatar prices $5 billion deal on mixed day for EM assets; America Movil mandates leads

By Christine Van Dusen

Atlanta, Nov. 29 - Qatar was in focus on Tuesday as the sovereign priced a $5 billion three-tranche deal after Italy's successful bond auction made for a mixed but supportive session for emerging markets assets.

"The broader backdrop is supportive, overall, with Italy getting their auction away," a trader said.

But some market sources cautioned against whole-hearted optimism.

"Expectations that a solution to the debt crisis is near have risen ahead of the upcoming meetings for European policymakers," according to a report from Barclays Capital Markets. "However, we believe it is too early to be confident and we suggest investors are cautious toward risky assets, especially after a rally that has been aided by light market positioning."

For the most part, trading was mixed during the session.

"It's a mixed bag," a trader said. "We are seeing even demand, but everyone is hoping to pick up bonds on the bid side as opposed to lifting offers."

The day also saw some issuers take steps toward the market, including Mexico's America Movil SAB de CV and China-based Global Logistics Properties Ltd.

Qatar prints bonds

In its new deal, Qatar priced a $5 billion issue of senior notes due 2017, 2022 and 2042 via Citigroup, HSBC, JPMorgan, Mitsubishi UFJ Securities, QNB Capital and Standard Chartered Bank, a market source said.

The Rule 144A and Regulation S deal included $2 billion 3 1/8% notes due Jan. 20, 2017 that priced at 99.719 to yield 3.184%, or Treasuries plus 225 basis points. The second tranche totaled $2 billion 4½% notes due Jan. 20, 2022 that priced at 98.951 to yield 4.63%, or Treasuries plus 262.5 bps.

The deal also included $1 billion 5¾% notes due Jan. 20, 2042 that priced at 98.928 to yield 5 7/8%, or Treasuries plus 287.5 bps.

"These deals look appealing versus the peer group, in my view," a trader said. "However there will be plenty of bonds flying around tomorrow, the last day of trading for November."

Active trading for Qatar

Ahead of the new deal, Qatar's existing bonds started the trading day a touch tighter.

"The secondary has been active in the 2019s and 2020s today with some nibbling of the 2015s," a trader said.

The 2019s were seen at 117.62 bid, 118.12 offered while the 2020s were trading at 108.37 bid, 108.87 offered. The 2015s were trading at 105.15 bid, 105.40 offered.

"When you consider [the new notes] are 25 bps cheap to weaker names like South Africa, it's easy to argue they have value," he said. "The five-year at 3.2% also looks good at a yield pick-up of 90 bps over the Qatar 2015s."

Said another trader, "Qatar is about as solid as they get in the region, and there has not been a tremendous amount of supply from the credit this year. Supply from Abu Dhabi, yes, but the Qatar space not as much. This will continue to establish their curve."

He said he's expecting good liquidity for the rest of the week.

"There's been very heavy activity on the 2030s and 2040s as one would expect, given the talk on the new 2042s," he said. "The 2015s have held in very well, and in fact over the month are unchanged, spread-wise. There's still good support into the close at 105.25 bid, 105.35 offered and very good volumes going through between 105.25 and 105.40 throughout the day."

Bahrain, TAQA hold well

Also from the Middle East, Bahrain's 2018 bonds were holding well, trading at around 101.

"Bahrain held in like a rock again," a trader said.

And Dubai Water and Electricity Authority's 2020 bonds were up about 1½ points versus Friday, printing at about 99.50.

"Dubai's 2020s are just trading at 102.25," he said. "Dubai is ticking along. We did see some paper come out from Emirates' 2016s and the Dubai sovereign late in the day."

Abu Dhabi National Energy Co. (TAQA) was also holding well, particularly in its 2016 bonds, he said.

"Their curve remains pretty solid out to the 2016s," he said. "It does feel like some paper has come out of the long end, however, especially the 2019s and the 20136s."

He also noted some selling for Lebanon and Qatar-based Qtel International.

IPIC receives support

Abu Dhabi's International Petroleum Investment Co.'s 2016s and 2017s received support early on Tuesday.

"The rest of the curve feels like there is paper around," a trader said.

But the long end of IPIC's curve was 10 bps wider, he said later in the session.

"The credit, I suspect, still remains vulnerable as there are a lot of loose bonds flying around," he said. "Its curve is way more liquid than Abu Dhabi's sovereign bonds."

Even Mubadala was less liquid on Tuesday, he said.

Russian corporates weaken

In other trading on Tuesday, retail investor interest was noted for Russia's OJSC Gazprom and Kazakhstan's KazMunaiGaz while Vimpelcom retraced some of its gains from the previous day.

"Russian corporates are seeing some weakness," a trader said.

Looking to Turkey, trading activity was muted, with most of the activity on the longer end of the sovereign curve.

"We've seen better buyers of Akbank's 2015s and Garanti Bankasi AS' 2017s after the Italian auction," he said.

America Movil plans roadshow

In deal-related news, Mexico-based telecommunications company America Movil mandated HSBC to arrange a roadshow for a possible issue of renminbi-denominated notes, a market source said.

The roadshow will begin Dec. 5 in Singapore and conclude Dec. 6 in Hong Kong.

And China-based Global Logistics Properties set price talk for its planned benchmark-sized issue of perpetual notes at the mid- to high-5% area.

JPMorgan, Citigroup, Goldman Sachs and DBS are the bookrunners for the Regulation S notes, which are expected to price this week.

Proceeds will be used for general funding purposes.

In other news, the final book for China-based steel company Shougang Corp.'s recent RMB 1 billion issue of 4 7/8% senior notes due Dec. 2, 2013 was about RMB 1.1 billion, a market source said.

The notes priced at par to yield 4 7/8% via Bank of China, Citic Capital, DBS, ICBC and JPMorgan in a Regulation S deal.

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