Poland, Hong Kong's Swire Properties sell bonds as Spain news rouses, then rattles markets

By Christine Van Dusen

Atlanta, June 11 - The Republic of Poland and Hong Kong's Swire Properties sold notes on Monday as Spain's request for a banking bailout gave an early boost to emerging markets bonds. But by the afternoon investors were questioning the rescue plan, and risky assets sagged.

"There was a relief rally this morning as the market reacted to the proposed Spanish bank injection," a trader said. "It was a poor afternoon session, however, with Spanish bonds markedly weaker."

Said a London-based analyst, "As the market seeks to digest the exact terms of the Spanish bailout package, the initial reaction is positive with spreads 10 basis points to 15 bps tighter in most EM names."

But as the day went on, spreads widened, with the Markit iTraxx SovX index spread going from Treasuries plus 313 bps to 325 bps.

"Given how well we performed on rumors of the bailout, it's hard to see the market getting too carried away," a London-based trader said. "But obviously the squeezed names like KazMunaiGas will perform."

The Russian corporate was about 70 bps tighter on Monday. Even though Russia was on a holiday, Russian bonds showed the most liquidity, he said.

"Russia's 2030s are just shy of the 120 level," he said.

Against this backdrop, some Asian issuers took steps toward the market, including Export-Import Bank of China (Chexim) and Agricultural Development Bank of China. Dubai's Jebel Ali Free Zone (Jafza) also made progress on its planned deal.

By the end of the European session, Middle Eastern and North African bonds were 10 bps tighter and Russian bonds continued to see some demand. So too did Turkey, particularly bonds on the long end.

"Client activity remains below average and actually skewed to better selling," he said. "But that doesn't stop Russia's 2042s from trading up 1 ½ points to 106."

Ukraine stood out as an underperformer on Monday.

"Spreads are mostly unchanged and interest in corporate debt is evaporating," a trader said.

Poland, Swire print notes

In its new deal, Poland priced a €1.5 billion issue of 3¾% notes due Jan. 19, 2023 at 99.810 to yield mid-swaps plus 195 bps, a market source said.

Barclays Capital, Citigroup, Erste Group and ING were the bookrunners for the Regulation S deal.

Proceeds will be used to finance the country's budget borrowing requirements or for general financing purposes.

"Poland is taking advantage of the rally to issue a €1.5 billion 10-year, offering investors the chance for a 5 bps pick-up on a day when other convergence names have rallied 10 bps," a trader said.

Property developer Swire Properties priced $500 million 4 3/8% notes due June 18, 2022 at 99.576 to yield 4.428%, or Treasuries plus 280 bps, a market source said.

HSBC and Standard Chartered were the bookrunners for the Regulation S deal.

Asian banks get busy

Also from Asia, Beijing-based lender Chexim set price talk for its planned renminbi-denominated notes due in five and 15 years, a market source said.

The five-year tranche was talked at 3.35% to 3.4%, and the 15-year tranche's yield was set at 4.15%. Bank of China, Bank of Communications, BNP Paribas, HSBC, ICBC and RBS are the bookrunners for the Regulation S deal.

Agricultural Development Bank of China mandated Bank of China, Standard Chartered Bank, ICBC, CCB International Capital, Agricultural Bank of China and Bank of Communications as the bookrunners for a renminbi-denominated issue of notes, a market source said.

The Regulation S deal is expected to launch following a roadshow.

Jafza whispers deal

Jafza, which operates an industrial free-trade zone outside Dubai, whispered its planned $650 million notes due 2019 at the low 7% area, a market source said.

Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Citigroup, Dubai Islamic Bank, Emirates NBD, National Bank of Abu Dhabi and Standard Chartered are the bookrunners for the Regulation S deal.

Proceeds will be used to refinance existing debt.

A roadshow ends Tuesday.

"At only 150 bps over the sovereign, this looks like it's just targeted at locals," a trader said.

PTTEP deal in demand

The final book for the $500 million issue of 6.35% notes due 2042 from PTT Exploration & Production PCL subsidiary PTTEP Canada International Finance Ltd. was about $3.7 billion with 228 accounts involved, a market source said.

The notes priced at par to yield Treasuries plus 359.6 bps via Citigroup, Deutsche Bank, HSBC and UBS in a Rule 144A and Regulation S deal.

About 47% of the orders came from the United States, 38% from Asia and 15% from Europe.

Asset managers and fund managers accounted for 69%, insurers 14%, private banks 9%, banks 3% and others 5%.

PTT Exploration & Production is a Bangkok-based energy and exploration company that is 65% owned by the government of Thailand.

CAF deal oversubscribed

Also oversubscribed was the recent $600 million issue of notes from Venezuela-based lender Corporacion Andina de Fomento.

The 2022 notes priced at 99.225 to yield 4.472%, or Treasuries plus 282.5 bps, with bookrunners Deutsche Bank, Goldman Sachs and HSBC in a Securities and Exchange Commission-registered transaction.

Proceeds will be used for general corporate purposes, including the funding of lending operations.

Alongside the new issue, CAF is also offering to exchange its some of its $1 billion of 8 1/8% notes due 2019 and its $750 million of 5¾% notes due 2017 for new 4 3/8% bonds.

IPIC, SECO active

In trading, Monday was a fairly good day for names like Abu Dhabi-based International Petroleum Investment Co., a trader said.

"It was a very active day with interest in IPIC, Qtel International, Qatari Diar, Dolphin Energy and Saudi Electricity Co.," he said. "There are generally better sellers today, having seen buyers last Thursday and Friday."

IPIC's 2015 notes - which traded Friday at 103.25 bid, 103.75 offered - were quoted Monday at 103 bid, 103.75 offered. The company's 2016 notes were seen Friday at 109.12 bid, 109.87 offered and traded Monday at 109 bid, 109.75 offered.

Saudi Electricity company's 2022 notes were quoted Monday at 102.60 bid, 102.95 offered after trading Friday at 102.30 bid, 102.70 offered.

"This part of the world remains well supported, and spreads on certain names and tenors offer some degree of value, though we remain a little hostage to our friends in Europe," a trader said. "Beware the July lull, though, just around the corner."

Aleesia Forni contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.