Russian bonds struggle; roadshows ahead for Bahrain, Hong Kong; Burgan Bank taps leads

By Christine Van Dusen

Atlanta, Aug. 28 – Bonds from Russia were weak at the start of Thursday’s session on news that the sovereign’s troops made further incursions into Ukraine and that further sanctions from the West are forthcoming.

“These reports will simply add to the tensions created by the capture of paratroopers earlier this week, and Moscow’s intention to send further aid convoys,” a London-based analyst said. “The prospect of sanctions, potentially in the next coming days, is becoming increasingly likely. What those sanctions would be is unclear at this stage.”

Financial companies from Russia have already faced sanctions, he said. And their bonds have responded, widening by an average of 30 basis points on Thursday.

“One would presume the energy sector would be an obvious target, as potentially could be the metal and mining sector, although this seems less likely,” he said.

Russian credit default swaps spreads moved out 12 bps on Thursday. Turkey’s CDS, meanwhile, widened 5 bps.

The Russian sovereign’s 3½% 2019 notes that priced at 99.195 and traded at 99.38 bid, 99.88 offered on Wednesday were seen Thursday at 98½ bid, 99 offered, a London-based trader said.

Russia’s 4 7/8% notes due 2023 that priced at 98.162 and traded Wednesday at 100.19 bid, 100.69 offered were quoted Thursday at 98.35 bid, 99.10 offered.

The 3 5/8% notes due in 2020 that priced at 99.533 and traded Wednesday at 101¾ bid, 102¼ offered traded Thursday at 101¼ bid, 101¾ offered.

Ukraine’s bonds have dipped so far this week as investors try to make sense of the conflict and comments from Tuesday’s summit with Russian leaders in Minsk, said Svitlana Rusakova of Dragon Capital.

“There is puzzling silence from Ukrainian leadership,” she said.

Most Ukraine bonds dip

Ukraine’s eurobonds due 2023 were seen at 87.90 bid, 89 offered, down by 0.6 percentage points, according to a report from Eavex Capital.

Ukraine-based poultry company MHP SA’s 2020s have decreased by 0.6 percentage points, to 85.60 bid, 88.20 offered.

Only Ukraine’s MetInvest BV has seen its bonds rise this week, with the 2018s moving up 1.2 percentage points to 67½ bid, 68.80 offered, Eavex said.

Overall, “[emerging markets] is opening a little weaker,” the analyst said. “But most of the focus is on Russian developments this morning.”

Middle East in focus

Middle Eastern bonds put in a “fairly active day,” a London-based trader said. “Lower-beta names trade well. Long-dated bonds, corporate-wise, remain solidly in demand.”

He pointed to Qtel International’s 2043s, International Petroleum Investment Co.’s 2041s and Abu Dhabi National Energy Co.’s 2036s.

Dubai Holding’s bonds saw two-way activity, trading at 103.55 bid, 103.90 offered.

“Still plenty of bonds offering limited upside, but such is the world we live in,” he said.

Roadshow for Bahrain

Bahrain will set out on Sept. 2 for a roadshow to market a dollar-denominated issue of notes, a syndicate source said.

Citigroup, Gulf International Bank, MUFG Securities and Standard Chartered Bank are the bookrunners for the Rule 144A and Regulation S deal.

The roadshow will begin in Saudi Arabia and travel to Abu Dhabi, Los Angeles, Boston and New York before concluding in London on Sept. 8.

“If we assume this is a new 30-year, this bond will join the Government of Dubai’s 2043 as the longest-dated sovereign paper from the region,” the London trader said.

Hong Kong plans marketing trip

Hong Kong will set out on Sept. 1 for a roadshow to market a dollar-denominated issue of Islamic bonds, according to an announcement from the sovereign.

HSBC and Standard Chartered Bank are the joint global coordinators, joint lead managers and joint bookrunners.

CIMB and National Bank of Abu Dhabi are the joint lead managers and joint bookrunners for the Rule 144A and Regulation sukuk offering.

Burgan Bank picks bookrunners

Kuwait’s Burgan Bank SAK has mandated HSBC, Citigroup, JPMorgan and National Bank of Abu Dhabi as bookrunners for an issue of notes, a market source said.

No other details were immediately available on Thursday.

Burgan Bank is a Sharq-based lender and subsidiary of Kuwait Projects Co. Holding KSC (Kipco).

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