Demand outpaces supply for EM bonds in 'solid start' to May; Senegal, Marfig, MIE on deck

By Christine Van Dusen

Atlanta, May 3 - Emerging markets investors went on a buying spree on Tuesday - picking up bonds from Turkish banks, Abu Dhabi's Mubadala Development Co. PJSC and Russia's Alfa Bank - even as the death of Osama bin Laden and the threat of retaliatory attacks cast a nervous pall over the market and slowed new issuance.

"With so many key global events, EM is taking a bit of a backseat right now," a London-based market source said.

Still, buying continued unabated. "People generally seem to have their buying boots on today," a London-based trader said. "The market's starting off its first real trading session of May on a firm footing. It's a solid start to the month with good demand sighted basically across the board."

The main issue, he said, is that there isn't enough supply to meet demand.

"Offer liquidity is thin on many names," the trader said. "It feels very hard to source a vast percentage of paper at the moment with the offer side liquidity thin."

Also on Tuesday, Senegal, Hong Kong's MIE Holdings Corp and Brazil's Marfrig Holdings (Europe) BV set or whispered price talk for their upcoming deals while several Chinese corporate issuers took steps toward the market.

Investors pick up Mubadala

In trading on Tuesday, the 2021 notes from Abu Dhabi-based investment vehicle Mubadala, which priced April 13 at 99.484 to yield Treasuries plus 210 basis points, were seen at 101 bid, 101.25 offered early in the morning. By late morning the notes were trading at 101.10 bid, 101.30 offered.

The loose bonds continue to get gobbled up, the London-based trader said.

"Cash price-wise the bonds have performed and versus Treasuries they've done pretty well too," he said. "I think the long end offers the most value at the moment. We've seen some buying. There's still some value versus the 2020s from International Petroleum Investment Co."

Abu Dhabi well supported

Also from the Middle East, Abu Dhabi National Energy Co.'s 2014 notes were trading at 105.50, tighter by 15 bps.

"There's some very solid street buying," the trader said. "That's very solid today. With some steepening witnessed over the past month, it will soon be time to move out along the curve."

He also noted good support for Abu Dhabi banks. And Dubai and Dubai Water and Electricity Authority "continue to click along with the sovereign," he said. "DEWA continues to look like a decent value versus the front end of the Dubai sovereign curve. But don't forget that the Dubai 2014 dollar bond is a sukuk, so it is even better placed."

And Abu Dhabi's Tourism Development and Investment Co. "remains bulletproof as usual, as do 95 of the sukuks I follow," he said.

Alfa Bank, others in demand

The day also saw good retail demand for Russia-based private lender Alfa Bank's 2021 notes, which priced April 19 at par and were trading Tuesday at 101.50 bid, 101.75 offered.

"The markets are, in general, well bid today. We are better sellers of Alfa Bank," the London trader said. "And Russian quasi-sovereigns are seeing good retail demand."

The main obstacle on Tuesday was the U.S. Treasury market. "It's a rock, with the 10-year at 3.27% now," he said.

Issues from South Africa were among the few to keep up with Treasuries on Tuesday, he said.

KKB on roadshow

Kazakhstan was also in focus on Tuesday, with a roadshow underway for lender JSC Kazkommertsbank (KKB) for dollar-denominated notes via JPMorgan and UBS in a Rule 144A and Regulation S transaction.

"After yet another long weekend and holidays in Asia, people still have many reasons not to engage with this market, so perhaps the roadshow from Kazkommertsbank will get attention," a London-based market source said. "It will be fascinating to see what premium they have to pay to their curve."

For other names from Kazakhstan, Tuesday was a mixed bag, the London trader said.

"BTA Bank is still heavy, although selling has stopped," he said.

The company's 2025 notes were trading at 68.75 bid, 69.75 offered while its 2018s were seen at 105.35 bid, 105.85 offered.

Turkey tightens

Looking to Turkey, the sovereign's release of better-than-expected inflation data led its bonds to tighten by about 3 bps, a source said.

On the corporate side, Turkey-based construction company Yuksel Insaat AS saw good demand from the retail side. The company's 2015 notes were seen at 96.75 bid, 97.75 offered after pricing Nov. 5 at 98.069.

"We are also seeing good retail demand for Turkish banks in general," the London trader said.

The 2021 notes from Turkiye Garanti Bankasi AS (GarantiBank) were trading at 99.40 bid, 99.70 offered. The bonds were issued April 14 at 98.086.

"We are left better sellers of GarantiBank," he said.

Finansbank taps bookrunners

Also from Turkey, lender Finansbank AS has mandated Citigroup, Deutsche Bank, HSBC and Standard Chartered for an issue of notes that could total as much as $750 million, a market source said.

The notes are being marketed during a roadshow this week.

"It'll be interesting to see the guidance level on Finansbank in the coming weeks," a trader said.

In other deal-related news, Marfrig Holdings (Europe) - a subsidiary of Sao Paulo-based beef producer Marfrig Alimentos SA - whispered its planned benchmark-sized offering of seven-year notes at 8¾%, a market source said.

"That looks very attractive," a market source said.

BB Securities, Bradesco BBI, Deutsche Bank, Itau and JPMorgan are the bookrunners for the Rule 144A and Regulation S notes, which are expected to price Wednesday.

Proceeds will be used for general corporate purposes.

Roadshows ahead

From Asia, Hong Kong-based coal company China Qinfa Group Ltd. announce plans to embark on a roadshow starting Wednesday for a possible issue of notes via bookrunner UBS.

Proceeds from the Rule 144A and Regulation S deal will be used for general corporate purposes, to refinance existing debt, for potential acquisitions and for capital expenditures.

And Hong Kong-based property developer China Resources Land Ltd. is planning a marketing trip that will commence around Wednesday for an issue of senior notes, according to a company filing.

HSBC, BOC International and DBS Bank are the bookrunners for the deal.

MIE, Senegal talk notes

Also on Tuesday, Hong Kong-based oil company MIE Holdings Corp. set price talk for its planned issue of $400 million notes due 2016 at the high 9% area, a market source said.

Merrill Lynch and Deutsche Bank are the bookrunners for the Rule 144A and Regulation S notes, which are non-callable for three years.

A roadshow wraps up on Friday.

And Senegal set price talk for its planned issue of benchmark-sized dollar notes due 2021 at the low- to mid-9% area, a market source said.

Standard Bank and Standard Chartered Bank are the bookrunners for the Rule 144A and Regulation S issue.

A roadshow started April 26.

"I suppose it looks good if you ignore the default risk," a market source said.

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