Itau Unibanco prints notes as China data boost market's mood; Dubai, RZD Capital on deck

By Christine Van Dusen

Atlanta, June 14 - Brazil-based Itau Unibanco Holding SA sold notes on a stronger Tuesday that saw moderately active trading and some movement toward the market for emerging markets issuers amid better economic data from China.

"With most people back from holidays, the market is a bit more active," a trader said. "With Chinese data not as bad as feared, risky assets are better supported on the open today."

Still, China's central bank later hiked the reserve requirement ratio by another 50 basis points, the sixth increase this year, said Gavan Nolan, analyst with Markit, in a report.

"It is quite likely we will see more tightening in policy in the months to come, as the official inflation target of 4% is still some way off," he said.

As a result of this, as well as regulatory concerns about accounting practices at some Chinese companies, two issuers - GCL-Poly Energy Holdings Ltd. and China Qinfa Group Ltd. - pulled their planned deals.

But the market's overall mood was still fairly positive, market sources said, leading Dubai, Russia's RZD Capital Ltd. and Thailand to advance deals.

"As well as the robust Chinese data, U.S. retail sales came in better than expected," Nolan said. "Even euro zone peripheral sovereigns rallied in the morning, though that was probably driven by short covering more than anything else."

The JPMorgan Emerging Markets Bond Index Plus spread tightened 14 bps to Treasuries plus 276 bps, with Argentina and Venezuela both narrowing by 24 bps.

In the secondary market on Tuesday, the recent wave of selling slowed, a London-based trader said. "The selling has abated, but the bounce has yet to come."

Said another trader: "It's been a moderately active day on the desk."

Unibanco sells bonds

In its new deal, Brazil's Itau Unibanco Holding (Cayman Islands branch) sold $500 million 6.2% notes due Dec. 21, 2021 at 99.764 to yield 6.231%, or Treasuries plus 315 bps, a market source said.

Bank of America Merrill Lynch and Itau BBA were the bookrunners for the Rule 144A and Regulation S notes.

Proceeds will be used for general corporate purposes.

Up next is Russia's RZD Capital, which plans an add-on to its 7.487% sterling notes due March 25, 2031 that was talked at the 101.75 area, a market source said.

Barclays Capital, Goldman Sachs and VTB Bank are the bookrunners for the Regulation S-only deal, which includes a change-of-control put at par if the Russian Federation ceases to own 66.67%.

The original issue of £350 million notes priced on March 18 at par to yield Gilts plus 325 bps after being talked in the low-300 bps area.

The borrower is OAO Russian Railways Co., a railway company based in Moscow.

Thailand gives mandate

Also on Tuesday, Thailand mandated HSBC as the bookrunner for an offering of inflation-linked Thai baht-denominated notes, a market source said.

The deal is expected to launch following a roadshow in Asia and Europe.

And Hong Kong-based green energy supplier GCL-Poly Energy Holdings postponed its planned issue of dollar-denominated fixed-rate notes due to market volatility, according to a company announcement.

RBS, Standard Chartered Bank, BOC International and BNP Paribas were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds were to be used for capital expenditures, refinancing debt and general corporate purposes.

China Qinfa postpones

Also postponing a deal on Tuesday was Hong Kong-based coal company China Qinfa Group.

The issuer had planned to sell $150 million to $200 million five-year notes but canceled the plans due to market volatility, a market source said.

UBS was the bookrunner for the Rule 144A and Regulation S notes, which were non-callable for three years and were talked at the 11% area.

Proceeds were to be used for general corporate purposes, to refinance existing debt, for potential acquisitions and for capital expenditures.

Dubai gives guidance

In news from Dubai, the sovereign talked its planned dollar-denominated issue of benchmark-sized notes due 2021 at mid-swaps plus 375 bps to 387.5 bps, a market source said.

UBS, RBS and Emirates NBD are the bookrunners for the Regulation S-only notes, which include a put option in 2016. Proceeds will be used for general budgetary purposes.

"It just seems a very odd structure to an issue that will scare away many people. I'm not sure this appeals to locals," a trader said. "It will, however, appeal to hedge funds. Depending on the issue size there could also be some bonds flying around on the break. However, the option is worth something."

Also from Dubai, the recent issue of 5 1/8% 2016 notes from Dubai's Emirates airline that priced at 99.094 on June 1 was seen Tuesday at 99.73 bid, 99.93 offered.

"That's 4 bps wider versus Treasuries, from launch," he said.

Middle East in focus

Also from the Middle East, Ras al Khaimah was not very liquid, a trader said. "But this credit is a rock."

And the recent issue of notes from HSBC Bank Middle East - which priced at par on May 26 - was trading Tuesday at 101.40 bid, 101.55 offered. Abu Dhabi opened 2 bps to 4 bps tighter, a trader said.

Meanwhile, Sharjah-based SIB Sukuk Co. II Ltd.'s 2016 notes continued ticking along.

"Although, spread-wise, it's getting to where I thought it would end up," he said, pointing out that it was trading at 102.70 bid, 103.10 offered.

BTA bonds still lag

Another trader was watching Kazakhstan-based lender BTA Bank, which announced its recognition as a top restructured deal of the year by the Eurolawyer Forum 2011 on June 2 in London.

"The groundbreaking restructuring of BTA was one of the highest-profile restructurings in the region, and the judges ultimately recognized this in resolving to award BTA," said Graham Conlon, a partner with forum sponsor CMS Cameron McKenna, in a statement.

But the company's beleaguered bonds didn't get a boost in response, a trader said.

"The bad news is the bonds are still at 80 and Alliance Bank is now being hit in sympathy," a London-based market source said.

Mixed trading seen

He noted that some money had been put to work for International Petroleum Investment Co., Sberbank, Ukraine and Turkey.

"But the impact on prices is 5 bps at best, with many other prices unchanged," he said, pointing out that better selling was seen for Turkey-based Yuksel Insaat AS' 2015 notes.

"It's been a pretty quiet day for corporates, with only small retail interest," he said. "The Turkey sovereign curve, on the other hand, performed well with locals mainly buying the long end toward the end of the day."

Sberbank's 5.4% 2017 notes were trading Tuesday at 104.25 bid, 104.75 offered while its 2021s were seen at 99.80 bid, 100.05 offered.

"I don't understand why more people are not extending from the 2017s to the 2021s," another trader said.

Looking to Africa, decent spread tightening was seen, along with good Street interest in Morocco's 2020 notes.

"Nigeria is closing above 105," a trader said. "Also, Senegal, Ghana and Gabon are all going out supported."

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