Russia's VTB Bank, Brazil's Braskem sell bonds; EM spreads tighten; bond fund inflows rise

By Christine Van Dusen

Atlanta, July 13 - Russia's VTB Bank and Brazil's Braskem priced notes to end a "banner week" for emerging markets assets, even as the global economic picture remained cloudy.

"It's the end of a stunning week for this asset class," a London-based trader said. "The long end is off to the races, with it being a banner week for the likes of long-end Abu Dhabi National Energy Co., International Petroleum Investment Co. and Turkey."

The Markit iTraxx SovX index spread was tighter on Friday, at Treasuries plus 274 basis points.

"New deals have been eaten up, credit default swaps have drilled lower and weekly inflows were positive," he said.

Indeed, flows into emerging markets bond funds hit a 17-week high of $1.14 billion for the week ended July 11, according to a report from data-tracker EPFR Global.

"The second week of July saw investors move aggressively into fixed income fund groups associated with higher risk and returns as they waited to see how the latest act of the eurozone crisis - the bailing out of Spain's banking sector - plays out," EPFR said. "Emerging market bond funds are also benefiting from the overall hunger for yield, with the latest week's commitments pushing year-to-date inflows over the $25 billion mark."

Funds with hard currency mandates continued to receive the majority of new money, the report said.

VTB, Braskem print notes

In its new deal, VTB Bank priced a S$400 million issue of 4% senior notes due July 20, 2015 at par to yield 4%, a market source said.

VTB Capital and OCBC were the bookrunners for the Regulation S deal.

Petrochemical company Braskem added $250 million to its existing $500 million 7 1/8% notes due July 22, 2041 at 101.75 to yield 6.983%, or Treasuries plus 442.9 bps, a market source said.

Bank of America Merrill Lynch, HSBC and Morgan Stanley were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds will be used to prepay existing debt and for general corporate purposes.

The final book was $1.8 billion.

ICA taps bookrunners

In other deal-related news on Friday, Mexico-based construction company Empresas ICA SAB de CV mandated Bank of America Merrill Lynch, Deutsche Bank and Goldman Sachs for a roadshow from July 13 to 18, a market source said.

The marketing trip will begin in London and travel to New York before concluding on the West Coast.

Emaar moves higher

The final book for Dubai-based Emaar Properties' recent $500 million 6.4% notes due 2019 - which priced at par to yield mid-swaps plus 519.3 bps - was $4.65 billion with 185 orders, a market source said.

About 48% of the orders came from the Middle East, 38% from Europe, 13% from Asia and the rest from the offshore United States.

Asset managers accounted for 47%, banks 40%, private banks 7% and others 6%.

The new Emaar notes opened on Friday at 101.55 bid, 101.85 offered and later traded at 101.75 bid, 102.25 offered.

"It printed at 101.625 this morning, first thing, and then steadily went higher as the day went on," a trader said. "With a lot of locals out today, I think the new one can tick a little higher still next week. After all, it's a good name, well liked and regarded, a sukuk, and only $500 million was issued."

Qatar quieter

The recent issue of $4 billion notes due 2018 and 2023 from Qatar was quieter on Friday, following Thursday's feeding frenzy, a trader said.

The deal, issued by funding vehicle SoQ Sukuk A QSC, included $2 billion 2.099% notes due 2018 and $2 billion 3.241% notes due 2023.

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

The 2018 notes opened Friday 99.87 bid, 100.07 offered and the 2023 notes started the day at 100.90 bid, 101.10 offered. By the end of the session the 2018 notes were quoted at 99.98 bid, 100.08 offered and the 2023 notes at 101 bid, 101.10 offered.

"It's a quieter day on Qatar, as predicted," a trader said. "It was tighter, helped by the U.S. Treasury move. It does feel as though both are very well supported on the bid side."

DPWorld closes above par

Also from the Middle East, Dubai-based DPWorld saw its 2037 notes print north of par on Friday.

"So with five-year credit default swaps down at 250 earlier today, the 2037s finally have caught the attention of a few and close above par for the first time since August of last year," a trader said. "This bond actually traded at 94 in early June, and given the bid for early duration I'm seeing in EM, this one can arguably still perform."

DPWorld's 2017 notes, meanwhile, were up at 109.

"That's 55 bps better on the month," he said.

MAF, Bahrain in focus

The $500 million issue of 5¼% seven-year notes from Dubai's Majid al Futtaim (MAF) that came to the market at par was trading Friday at 100.30 bid, 100.60 offered.

On Thursday the notes were seen at 100.25 bid, 100.55 offered.

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 Friday at 100.25 bid, 100.50 offered, unchanged from Thursday.

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

Halkbank sees sellers

The recent upsized $750 million issue of 4 7/8% notes due July 19, 2017 from Turkey's Turkiye Halk Bankasi (Halkbank) that priced at 99.453 to yield 5% performed well on Friday, a trader said.

The notes opened Friday at 100.25 bid, 100.50 offered and later traded at 100.12 bid, 100.25 offered.

"Only sellers," he said during the European morning.

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

"The bond has done very nicely," he said. "It traded down to 100 but held there very well before the Street started picking up paper with good clips going through at the 100.125 bid, 100.1875 offered level before taking another leg higher to 100.35 bid, 100.40 offered."

The notes closed Friday at 100.43 bid, 100.56 offered.

"It's a very solid effort, closing up a point and virtually flat to Vakifbank in yield terms," he said. "In fact, selling Vakif with a 104 handle to buy this one arguably makes sense."

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