DEWA brings $1 billion issue; spreads tighten; ADCB, ADIB, Turkish bonds get attention

By Christine Van Dusen

Atlanta, Feb. 28 - Dubai Electricity and Water Authority (DEWA) sold $1 billion five-year notes on Thursday as spreads continued narrowing and investors embraced risky assets.

"Market is well supported and remaining fairly technical," a London-based trader said. "Higher-yielders are ticking along OK, new issues are doing well and lower dollar-priced, more-liquid issues are trading through the older curve."

The Markit iTraxx SovX index spread opened Thursday at Treasuries plus 180 basis points, 3 bps tighter. And the corporate index narrowed by 7 bps, to Treasuries plus 227 bps.

"A decent start to London trading, with stocks rebounding overnight and risk back on," a London-based analyst said.

Turkey's long-dated sovereign bonds were 3 bps tighter, with buyers seen in the 2025, 2034 and 2041 maturities. Buying was also seen for Turkish bank bonds. And sovereign bonds from Russia were 2 bps tighter, with demand noted for Vimpelcom's 2023s. The latter notes tightened 3 bps.

From the Middle East, the recent perpetual notes that Abu Dhabi Islamic Bank priced at par opened Thursday at 104¼ bid, 104¾ offered, then moved to 104¾ bid, 105¾ offered.

"ADIB perpetuals have been very much in vogue recently," a trader said. "The low during the US Treasury-inspired sell-off was circa 102 3/8, so this has been an impressive comeback. Plenty of retail investor interest on that."

In deal-related news, Turkey's Turkiye Garanti Bankasi AS (GarantiBank) set initial price talk for its upcoming issue, and both Brazil's Cosan SA and the Republic of Honduras mandated bookrunners for roadshows.

ADCB in demand

Also seeing demand on Thursday was Abu Dhabi Commercial Bank (ADCB)'s new 2023s, which closed up about a point from issuance earlier this week.

The notes opened Thursday at 99¾ bid, par offered after pricing at 99.127 via Abu Dhabi Commercial Bank, Barclays, ING, JPMorgan, National Bank of Abu Dhabi and RBS in a Regulation S deal.

"Seen some follow-through buying on National Bank of Abu Dhabi's 2019s and Qatar National Bank's 2018s," a trader said.

Thursday also saw some selling on the long end for Qatar, International Petroleum Investment Co. (IPIC) and Abu Dhabi National Energy Co. (TAQA).

"Active week, all told," he said.

Egypt in focus

From Africa, bonds from Egypt were in focus after the country's budget deficit widened by 36% for the first seven months of the current fiscal year.

"This widening was driven by substantially higher expenditures on subsidies and social benefits," the London analyst said. "This is in combination with declining revenues due to elevated political uncertainty."

In response, Egypt's 2020s traded Thursday at 92 bid, 96 offered after Wednesday's close at 90 bid, 94 offered. The 2040s were seen Thursday at 86 bid, 90 offered after Wednesday's 86½ bid, 90½ offered.

Ukraine bonds climb

Looking to Ukraine, sovereign bonds are on the rise this week, said Svitlana Rusakova of Dragon Capital.

"It is hard to pinpoint an exact reason, though the 'cautiously optimistic on IMF' headlines from our conference and a bullish note from VTB definitely helped," she said.

The International Monetary Fund is requiring the Ukrainian government to implement fiscal adjustment measures, including the increase of heating and gas rates and stabilizing the financial banking system.

"The Fund further stated that its previous visit to the sovereign resulted in constructive dialogue and is cautiously optimistic that the government will cooperate further to secure the loan package," the London analyst said.

In response, corporate bonds have moved up, though not as strongly as the sovereigns.

DEWA prices notes

In its new deal, Dubai's DEWA sold $1 billion 3% notes due March 5, 2018 at par to yield 3%, or mid-swaps plus 223.4 bps, a market source said.

The notes were talked at the low-3% area.

Abu Dhabi Islamic Bank, Citigroup, Dubai Islamic Bank, Emirates NBD, RBS and Standard Chartered Bank were the bookrunners for the Regulation S deal.

The proceeds will be used to refinance debt and invest in company projects.

"Impressive return to the markets," a trader said.

New issue trades up

Prior to pricing, the notes from DEWA were seen in the gray market up 5 cents on the bid side and 25 cents on the offer side.

"Basically pricing flat to the October 2016s for the extension to March 2018," a London-based trader said.

The notes closed Thursday at 100.35 bid, 100½ offered.

"New issues just reinvigorate curves, and in many cases other assets, so we have seen good demand for DEWA's 2020s," he said.

The 2020s were seen Thursday at 122.62 bid, 123.12 offered before moving to 124.93 bid, 125.43 offered.

Other Middle Eastern names benefitted too, including Emirates' 2025s, which tightened 7 bps, and the Dubai sovereign curve, which tightened as much as 6 bps.

GarantiBank, Cosan roadshows

Turkey's GarantiBank set initial price talk at 7½% for its planned issue of Turkish lira-denominated notes, a market source said.

BNP Paribas, Deutsche Bank, Goldman Sachs, Mitsubishi UFJ Securities and Standard Chartered Bank are the bookrunners for the Rule 144A and Regulation S deal.

And Brazil-based bioethanol, sugar and energy producer Cosan mandated Bradesco BBI, BTG Pactual, Itau BBA and Morgan Stanley for a dollar-denominated issue of notes due in 10 years that will be marketed during a roadshow.

The marketing trip for the Rule 144A and Regulation S deal will begin Friday in Santiago and travel to London, Los Angeles and Switzerland before concluding on March 6 in New York.

Honduras picks banks

Honduras has mandated Barclays and Deutsche Bank for a roadshow to market a dollar-denominated issue of notes, a market source said.

The Rule 144A and Regulation S roadshow begins March 4 in London, then moves to New York and Boston before wrapping up on March 7 in Los Angeles.

In other news, India-based HDFC Bank Ltd. on Wednesday priced a $500 million issue of senior notes due in 2018 with a 3% coupon via BofA Merrill Lynch, Citigroup, JPMorgan and Standard Chartered Bank in a Regulation S deal.

No other details were immediately available on Thursday.

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