EM assets stay strong as Dubai's Emaar, Turkey's Halkbank, Mexico's Bancomer price deals

By Christine Van Dusen

Atlanta, July 12 - Dubai's Emaar Properties, Turkey's Turkiye Halk Bankasi (Halkbank) and Mexico's BBVA Bancomer sold notes on a Thursday that saw emerging markets assets fare well, even as investors shunned most risk and sought out safety amid continued concern about the European economic situation.

"Against a backdrop that I would class as weak, this market is well supported," a London-based trader said. "Given what is going on out there, global rates-wise, the bid for fixed income is likely to remain, at least over the summer in the case of the Gulf region. It's a very impressive effort."

Investors likely are impressed by the growth rates of many emerging markets, he said.

"Or else there is just too much cash out there being squeezed out of zero and sometimes negative developed markets that needs a return, that needs a yield," he said.

As a result, new issues from emerging markets are getting eaten up, he said.

"Order books are massive and deals are squeezed right in versus initial guidance," a trader said. "They are still performing nicely in the secondary."

In the secondary market, investors are rotating out of equities into emerging markets assets, he said.

"And what is also apparent is the bid for duration," he said.

Long-dated bonds from Russia, Turkey and the Middle East have been having a superb run, he said.

"The bid for duration has driven some of these cash prices to amazing levels," he said. "There remains one or two that look very reasonably priced and can still perform."

Emaar sells notes

In its new deal, property developer Emaar priced a $500 million issue of 6.4% notes due July 18, 2019 at par to yield 6.4%, or mid-swaps plus 519.3 basis points, a market source said.

The notes priced tighter than talk, set at 6½% to 6 5/8%.

Al Hilal Bank, Barwa Bank, Dubai Islamic Bank, Emirates NBD Capital, HSBC, Noor Islamic Bank and Standard Chartered Bank were the bookrunners for the Regulation S-only deal.

"Emaar came and did very nicely," a trader said. "It's a well known name, offering a yield and a bond near par. Of course it didn't ever trade at par, apart from those lucky enough to get bonds in the primary market."

Emaar sees profit-taking

Prior to pricing, the gray market for Emaar was well supported, a trader said.

"Once it was free to trade, it raced up to 102 and closed at 101.50 bid, 101.75 offered," he said. "The yield at the bid side is 6.13%, just a small tightening from the 6 ¾% initial price talk."

After the Emaar notes priced, they were quoted at 100.80 bid, 101.20 offered. Meanwhile, the issuer's existing 2016 notes were seen at 110 bid, 110.62 offered.

Later on Thursday, the new 2019 bonds were trading at 101.50 bid, 102 offered.

"The high print is 102," a trader said during the European afternoon.

At the close of the session, the new 2019 bonds were quoted at 101.43 bid, 101.75 offered.

"It seems there's been some light profit-taking around the 101.55 to 101.65 level," he said.

Halkbank does deal

Turkey-based lender Halkbank priced a $750 million issue of 4 7/8% notes due July 19, 2017 at 99.453 to yield 5%, a market source said.

The notes priced below talk, set at 5 1/8% to 5¼%.

Halkbank had originally planned to issue $500 million of notes, and guidance was initially given at 5 3/8%.

Bank of America Merrill Lynch, Citigroup and Deutsche Bank were the bookrunners for the Rule 144A and Regulation S deal.

"The deal has attracted a $3 billion order book," a London-based analyst said.

Halkbank trumps Vakifbank

The new Halkbank notes offer a small premium over Vakifbank, another lender that is majority-owned by Turkey.

"In our view, the two are fairly similar in terms of business model and franchise and are similarly rated," the London analyst said. "However, on pure fundamentals, Halkbank is better than Vakifbank in both profitability and balance sheet quality. We view the debut issue as coming at a fair price to the existing Vakifbank bonds."

Bancomer sells bonds

Mexican financial institution Bancomer priced a $1 billion issue of 6¾% subordinated tier II notes due Sept. 30, 2022 at 99.97 to yield 6¾%, according to a source close to the deal.

The notes were talked at the 6 7/8% area.

Goldman Sachs, Bank of America Merrill Lynch and BBVA Bancomer were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used to strengthen the company's capital structure and for general corporate purposes.

Qatar notes active, liquid

The recent $4 billion issue of Islamic bonds due 2018 and 2023 from Qatar was active in trading on Thursday.

The deal - issued by funding vehicle SoQ Sukuk A QSC - included $2 billion 2.099% notes due 2018 that yielded mid-swaps plus 115 bps and $2 billion 3.241% notes due 2023 that yielded mid-swaps plus 155 bps. Both tranches priced at par.

"The recent Qatar sukuks are very active and very liquid, and while the five-year has steadily dropped back to reoffer, the 10-year is well sponsored," the London trader said.

Selling for Qatar 2018s

Qatar's 2018 notes opened Thursday at 100.08 bid, 100.18 offered, while the 2023 notes started the day at 100.90 bid, 101.10 offered.

Later the 2018 notes were quoted at 99.95 bid, par offered and the 2023 notes at 100.90 bid, 101.05 offered.

"Conservatively I've counted at least a billion sellers of the 2018s," a trader said. "Snipers are out in force on the five-year."

By the European close, the 2018 notes were at 99.95 bid, 100.05 offered and the 2023 notes were quoted at 100.90 bid, 101.05.

"I think once these loose bonds clear, this [2018] bond is fine," he said. "The low hit today was 99.95 on the five-year. Meanwhile, on the long one, there was super-impressive take-out between 100.90 and 101 over the past 24 hours."

Qatar deal oversubscribed

The final book for the two-tranche Qatar deal was about $25.4 billion with about 750 orders.

For the five-year notes, about 58% of the orders came from the Middle East, 20% from Europe, 18% from Asia and 4% from the offshore United States. Banks accounted for 61%, fund managers 24%, private banks 7% and others 8%.

For the 10-year tranche, about 50% of the orders came from the Middle East, 23% from Europe, 21% from Asia and 6% from offshore United States. Banks accounted for 54%, fund managers 33%, private banks 9% and others 4%.

Barwa Bank, Deutsche Bank, HSBC, QInvest and Standard Chartered were the bookrunners for the Regulation S Islamic bonds.

TAQA, IPIC in demand

On Thursday, investors found it difficult to source long-dated paper from many Middle Eastern issuers, including Abu Dhabi National Energy Co. (TAQA) and International Petroleum Investment Co. (IPIC), a trader said.

"The one long-dated bond that still struggles a little is DPWorld's 2037s, which versus their peer group, I think, can still perform," he said. "Dubai sovereign paper has been a little quiet as attention has been focused on the new Emaar and new Qatar sukuks."

Majid Al Futtaim dips

Meanwhile, the $500 million issue of 5¼% seven-year notes from Dubai's Majid Al Futtaim that came to the market at par was trading Thursday at 100.25 bid, 100.55 offered after hitting a high print of 101 on Tuesday.

JPMorgan, National Bank of Abu Dhabi, Barclays Capital, Standard Chartered and UBS were the bookrunners for the Regulation S transaction.

The Kingdom of Bahrain's recent $1.5 billion issue of 6 1/8% notes due July 5, 2022 was quoted Thursday at 100.25 bid, 100.50 offered, unchanged from Tuesday.

The notes priced at 99.867 via Citigroup, Gulf International Bank, JPMorgan and Standard Chartered Bank in a Rule 144A and Regulation S deal.

Latin America in focus

Taking a closer look at Latin America, most corporates opened on Thursday unchanged from the previous day's close, a New York-based trader said. Longer-dated paper saw heavier-than-expected flows.

"Recent new issues, for the most part, are dominating inquiries and are comprising a good amount of the flows as well," he said. "We continue to see mostly two-way flows on the new issues but better potential buyers of the Odebrecht 2042s."

The Brazilian company's 2022 bonds weren't seeing much action on Thursday, he said.

"High-beta credits have tapered, and there has been some light Street selling in Marfrig Alimentos paper," he said.

Codelco notes trade up

The recent issue of $2 billion notes due 2022 and 2042 from copper mining company Corporacion Nacional del Cobre de Chile (Codelco) received some attention on Thursday.

The deal included $1.25 billion 3% notes due July 17, 2022 that priced at 98.663 to yield 3.157%, or Treasuries plus 165 bps. Those notes were trading Thursday at 164 bid, 161 offered.

The $750 million 4¼% notes due July 17, 2042 that priced at 97.547 to yield 4.398%, or Treasuries plus 180 bps, were quoted Thursday at 170 bid, 165 offered.

HSBC and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

Indian lender plans roadshow

In deal-related news on Thursday, Mumbai-based State Bank of India is planning a roadshow for its dollar-denominated issue of five-year senior notes, a market source said.

The marketing trip will begin on July 16 and take place in Asia, Europe and the United States.

Citigroup, Barclays, Bank of America, Deutsche Bank, UBS and JPMorgan are the bookrunners.

State Bank of India's existing bonds due 2015 traded "basically flat" on Thursday, a New York trader said.

Far East eyes deal

Far East Energy (Bermuda) Ltd., which is wholly owned by Houston-based and China-focused Far East Energy Corp., plans to offer notes due 2017, according to a company release.

Proceeds from the Rule 144A and Regulation S deal will be used to repay debt, for general corporate purposes and to fund a portion of interest payments under the notes.

Sri Lanka Ports Authority is planning a $1 billion issue of global bonds via HSBC and other leads.

Market sources were also whispering about a possible $250 million reopening of Brazilian petrochemical company Braskem's 2041 notes.

Aleesia Forni contributed to this article.

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