Nogaholding, Mubadala trade well; Egypt, Oman tighten slightly; Invepar postones deal

By Rebecca Melvin

New York, Nov. 2 – Emerging markets debt felt a little stronger in the early going on Friday although activity was muted heading into the weekend.

New deals for the Middle East and Africa region, including Bahrain’s Oil & Gas Holding Co. BSC (Nogaholding) tranches and Abu Dhabi’s Mubadala Development Co. PJSC’s 4½% 10-year notes, continued to trade and “have done fairly well,” a London-based trader said.

The two issuers brought $1.8 billion of new notes on Wednesday.

Among older notes, spread of Egypt and Oman bonds were about 5 basis points to 10 bps tighter on the day amid a relief rally in the early going when financial markets were uniformly positive, a London-based trader said. But emerging markets debt was giving back a little bit as the session’s close drew closer.

Renewed optimism that trade troubles between the United States and China could be reduced and a strong October U.S. jobs report were not enough to counteract Apple Inc.’s disappointing earnings report, which pulled U.S. stocks lower. U.S. Treasuries sold off a bit and high-beta emerging markets debt names had done a bit better, the trader said. But “it’s deathly quiet, really.”

In the primary market, it is expected that Kazakhstan will pull the trigger on its planned euro-denominated 10-year notes on Monday or Tuesday.

Meanwhile, Investimentos e Participacoes em Infraestrutura SA (Invepar) has postponed its planned U.S. dollar-denominated benchmark of intermediate notes, a syndicate source said on Friday.

It has been put on hold amid difficult market conditions, the source said.

Citigroup, Santander, BB Securities, Bradesco BBI and BTG Pactual were joint bookrunning managers of the proposed Rule 144A and Regulation S notes. Roadshow meetings in the United States and Europe wrapped up on Oct. 24.

Invepar is a Rio de Janeiro-based transport infrastructure concessions company.

Difficult market conditions were exacerbated when Mexico’s president-elect Andres Manuel Lopez Obrador this past week rattled investors by announcing he is cancelling a $13 billion airport project, fanning fears that the leader could veer away from policies that are business friendly.

“It doesn’t look good,” a New York-based market said regarding AMLO’s action. But in terms of issuers, it should only hurt those in Mexico.

Nevertheless the overall Latin America debt primary market remains in the doldrums and while there is still time for opportunistic pricing of deals between now and year end, Latin America issuers will be hindered.

Investors have lost money this year and they are just more cautious at this point late in the year. They are not going to be too aggressive with allocating funds to first-time issuers, which adds more uncertainty, a New York-based market source said.

When you look at the deal volume for the last few months there has been $2 billion from Colombia and $2 billion from Pemex, “this is the kind of stuff investors are going to prefer to see after a bad year. Things that are straightforward and more liquid,” the source said.

Mexican state oil company Petroleos Mexicanos SAB de CV (Pemex) priced a $2 billion issue of 6½% senior notes due January 2029 two weeks ago. The long 10-year deal was priced at a 335 bps spread to Treasuries and was multiple times oversubscribed.

Joint bookrunner were HSBC, JPMorgan, Scotia and UBS.

But the new Pemex tranche came and traded down and traded down on the AMLO news, the source noted.

On the issuer side, there may be reticence to pay the kind of premiums needed to get deals done in this environment, the source said.

Proceeds from the Invepar deal, which was expected to be up to $650 million of five to seven years, were going to be used to redeem older bonds. Moody’s gave an expected rating to the planned issue of B1 and S&P’s gave an expected rating of BB-.

Indonesia’s PT Pertamina (Persero) priced $750 million of 6½% 30-year senior notes (expected ratings: Baa2/BBB-/BBB-) at 98.061 to yield 6.65%, according to market sources on Friday.

The notes were brought under the company’s $10 billion global medium-term note program and sold via joint bookrunners BNP Paribas, Deutsche Bank AG, London Branch, HSBC, Mandiri Securities Pte Ltd. and Standard Chartered Bank.

Proceeds of the Rule 144A and Regulation S notes will be used to help finance the tender offer for the company’s outstanding $1 billion 5¼% senior notes due 2021 and $1.25 billion 4 7/8% senior notes due 2022.

Pertamina is a state-owned oil and gas company based in Jakarta.

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