Severstal, Pemex, Investec, Afreximbank sell bonds on volatile day for EM; spreads tighten

By Christine Van Dusen

Atlanta, July 20 - Russia's OAO Severstal, Mexico Petroleos Mexicanos SAB de CV (Pemex), South Africa's Investec Bank plc and African Export-Import Bank (Afreximbank) printed notes on a Wednesday that saw an early lift give way to some pessimism among emerging markets bond investors and issuers.

"Better news from the U.S. overnight - Apple results, Wall Street rallying and hopes that something may be cobbled together on the debt ceiling - helped to lift Asian markets," according to a report from RBC Capital Markets.

Said a trader: "With E.U. leaders continuing their stream of market-friendly comments, broader credit is doing well. But in the same way we outperformed as the market widened, many credits - like Russia and Kazakhstan are not screaming tighter today."

And the rally "lost steam" as the day went on, RBC said, as optimism over a fiscal deal in the United States and the upcoming euro zone summit faded.

Still, the JPMorgan Emerging Markets Bond Index Plus spread managed to tighten by 10 basis points to Treasuries plus 278 bps.

Severstal sells notes

In its new deal, Russia-based steel and mining company Severstal priced $500 million 6¼% notes due July 26, 2016 at par to yield Treasuries plus 481.6 bps, a market source said.

The notes priced at the low end of talk, which was set at 6¼% to 6 3/8%.

Barclays Capital and Goldman Sachs were the bookrunners for the Rule 144A and Regulation S deal.

Prior to pricing, the notes faced a "wall of flipping" in the gray market, a trader said.

"Despite a wall of flipping, it's managing to hold just about reoffer as it looks about 10 bps cheap," he said. "Retail [investors] have become conspicuous in their absence this week, which takes away a little impetus."

Afreximbank prints notes

Cairo-based lender Afreximbank sold $500 million notes due July 27, 2016 at par to yield 5¾%, a market source said.

The deal priced at the low end of talk, which was set at 5¾% to 5 7/8%.

Commerzbank, HSBC, Mitsubishi UFJ Securities and Standard Bank were the bookrunners for the Regulation S notes.

"It looks good to me for a Baa2 risk with virtually zero non-performing loans, when Ba2-rated steel companies can print at 6¼%," a trader said. "Based on the $1.5 billion in orders the sales team has taken in three hours, there is life out there."

Said another market source: "The rest of Africa is doing well as the focus is put on the sector."

The deal "clearly captures the current mood for all things African on a day where other African benchmarks like Nigeria, Egypt and Senegal all rally a half-point," the trader said.

Pemex, Investec do deals

In another new deal, Mexico-based petrochemical company Pemex priced a $1 billion tap of its 5½% notes due Jan. 21, 2021 at 105.011 to yield 4.835%, or Treasuries plus 190 bps, a market source said.

HSBC, Morgan Stanley and Banco Santander were the bookrunners for the Rule 144A and Regulation S transaction.

Proceeds will be used for general corporate purposes.

And South Africa-based lender Investec Bank priced a $5 million add-on to its floating-rate senior notes due July 15, 2013 at 100.02986, according to a company filing.

Investec was the bookrunner for the Regulation S notes.

Sri Lanka, Industrial ahead

Also on Wednesday, the Republic of Sri Lanka launched a $1 billion offering of 10-year notes to yield 6¼%, a market source said.

Bank of America Merrill Lynch, Barclays Capital, HSBC and RBS are the bookrunners for the Rule 144A and Regulation S notes.

And Guatemala's Industrial Subordinated Trust set price talk for its planned offering of dollar-denominated notes due 2021 at 8¼%, a market source said.

Bank of America Merrill Lynch is the bookrunner for the Rule 144A and Regulation S notes.

The notes are guaranteed by Banco Industrial SA, a lender based in Guatemala City.

Proceeds will be used to repay subordinated debt, to strengthen the company's regulatory capital base and for general corporate purposes.

Croatia sets guidance

In other deal-related news, the Republic of Croatia set price talk for its two-tranche offering of notes due 2016 and 2022, according to a market source.

Erste Group, PBZ Group, Raiffeisen Bank and Zagrebacka Banka are the bookrunners for the deal.

The 2016 notes, which are expected to total a minimum of 1 billion Croatian kuna, were talked at a yield of 5.9% to 6%.

The 2022 notes, which will total at least $500 million, were talked at mid-swaps plus 350 bps to 370 bps.

Temasek plans roadshow

Singapore-based investment company Temasek Holdings is planning a roadshow in Asia, Europe and the United States with bookrunners DBS, Deutsche Bank, Morgan Stanley and UBS, a market source said.

Russia-based lender Gazprombank has mandated Mitsubishi UFJ Securities for a roadshow, a market source said.

"Gazprombank hasn't tapped the market since last summer, and the dollar 2014s are at Libor plus 350 bps," a trader said.

And Mexico-based financial and retail corporation Grupo Elektra mandated BCP Securities, Jefferies and UBS Investment Bank for a dollar-denominated issue of seven-year notes, a market source said.

A roadshow for the Regulation S-only notes, which are non-callable for four years, will begin July 22.

Halk to issue notes

Turkey-based lender Halk Bankasi (Halkbank) is planning an issue of up to $2 billion equivalent of local and global bonds with various maturities, a market source said.

In trading, most names from Turkey opened unchanged, said a trader.

"The long end of the sovereigns was lifted on the screens, with demand mainly from locals," he said.

He was keeping an eye on Turkiye Vakiflar Bankasi TAO, following the previous day's news that the lender had mandated Barclays Capital, Goldman Sachs, JPMorgan and Standard Chartered Bank for a roadshow from July 20 to July 27.

A Rule 144A and Regulation S dollar bond offering is expected to follow.

"We haven't seen much activity yet on the banking sector after the news," he said. "The demand for Akbank and Garanti Bankasi AS papers is still strong."

In other trading, good buying was seen for Ukraine. "It's outperforming," a trader said.

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