Alsacia, Mexico sell notes after Egypt calms; volumes thin; PDVSA in demand; Delong delays

By Christine Van Dusen

Atlanta, Feb. 14 - Chile's Inversiones Alsacia SA and Mexico sold notes on a Monday that saw the markets fatigued from the successful anti-government protests in Egypt and the concern about other Middle Eastern countries following suit.

In response the JPMorgan Emerging Markets Bond Index Plus finished the day 5 basis points wider, with Venezuela an underperformer - wider by 26 bps - in light of the recent $3 billion issue from Petroleos de Venezuela SA (PDVSA).

"Today lacked the drama of Friday, with Egypt returning to normality and a dearth of economic news," said Gavan Nolan, an analyst with Markit, in a report. "Volumes were thin, according to traders, and it is likely that many investors were sitting on the sidelines ahead of crucial inflation data to be published tomorrow."

Egypt's spreads remained close to Friday's closing level of 315 bps bid, 335 bps offered.

"Though there were signs that the country is returning to normal, there were also indications that the transition to a new civilian government won't be easy," Nolan said.

Egypt's 2020 bonds - which were seen trading at 97.5 bid, 98.50 offered a week ago - were at 96 bid, 97 offered on Monday.

Contagion continues

"Keep in mind there is plenty of scope for further unrest in Egypt and elsewhere in the coming days and weeks," said Nick Chamie, head of emerging markets research for RBC Capital Markets, in a report.

Indeed, the contagion that many market-watchers were waiting for has surfaced in other Middle Eastern countries, including Yemen, Algeria, Jordan, Iran and possibly Syria.

"In Syria little news is available as the government maintains a tight grip," Chamie said.

Also seeing some turmoil was Bahrain, where anti-government protestors held a "day of rage" near the capital and in surrounding villages.

The sovereign's 2020 bonds - which traded Thursday at 96.75 bid, 97.25 - opened Monday at 95.50 bid, 96.50 offered.

"But spread widening was limited in a thin market," Nolan said.

Said a New York-based trader: "Light volumes continue."

Dubai, DEWA, Kipco solid

Dubai, meanwhile, saw its liquidity affected by the Prophet Mohammed's upcoming birthday, though both the sovereign and Dubai Electricity and Water Authority opened solidly on Monday, a London-based trader said.

"The front end continues to hold very well, and it's painful being short there," he said. "For all its real estate issues I would say at least with Dubai you are somewhat paid for the risk."

Also solid on Monday, he said, was Kuwait's Kipco, which saw its 8 7/8% notes due 2016 trading at 110.75 bid, 111.75 offered. About a month ago, the bonds were at 110.37 bid, 111.37 offered.

"Kipco has had a great run," the trader said. "But we have to ask how much further this credit can be squeezed from here."

PDVSA in focus

The New York-based trader was keeping an eye on the $3 billion issue of 12¾% notes due Feb. 17, 2022 from PDVSA via Citigroup and Credit Suisse, which last week was offered to production businesses in Venezuela.

With this first offer, the Rule 144A and Regulation S notes - which priced at par - can be purchased at a rate of 4.3 bolivars to the dollar and then traded abroad in dollars. Proceeds will be used for general corporate purposes.

According to a statement on PDVSA's website, the total book was about $9.1 billion.

PDVSA is a state-owned oil company.

Venezuela and PDVSA bonds were lower on the day, the trader said, with investors primarily looking to swap the company's 2017s for the new 2022s.

Alsacia, Mexico print notes

Also from Latin America, Chile-based transportation company Inversiones Alsacia on Monday sold $464 million notes due Aug. 18, 2018 at par to yield 8%, a market source said.

Bank of America Merrill Lynch and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal, which priced in line with guidance of 8%.

The notes are non-callable for four years.

Also selling notes on Monday was Mexico, with a $1 billion tap of its 5 1/8% notes due Jan. 15, 2020 coming to market at 102.01 to yield 4.844%, or Treasuries plus 123 bps, a market source said.

Barclays Capital and HSBC were the bookrunners for the Securities and Exchange Commission-registered deal.

The total issue size is now $3 billion.

Delong postpones

China-based steel manufacturing and trading group Delong Holdings Ltd. has delayed its planned issue of up to $250 million senior notes due 2016, a market source said.

No details on the reason for the postponement were available Monday.

Credit Suisse was the bookrunner for the Rule 144A and Regulation S transaction.

Proceeds were to be used to refinance debt, for general corporate purposes and for strategic investments in the Chinese steel sector.

Indonesia taps bookrunners

In other deal-related news, Indonesia has mandated Deutsche Bank, JPMorgan and UBS for a $2 billion two-tranche issue of notes due 2021 and 2041, a market source said.

And Russia-based aluminum company United Company Rusal plc has received board approval to move forward with a RUB 30 billion issue of notes by May, according to a company announcement.

This adds to the company's plans for CNY 1 billion notes as well as $1 billion in eurobonds, a market source said.

Proceeds will be used to refinance debt.

"It's fairly quiet out there," a New York-based market source said. "I think it's that the supply isn't as great as everyone thinks it is in EM. The markets are good, but it's just a function of the calendar just not being there right now."

© 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.