Bank of Baroda prices as investors eye Middle East turmoil; RKI on tap; Bahrain in focus

By Christine Van Dusen

Atlanta, Feb. 17 - India's Bank of Baroda sold notes on a Thursday that saw better buying but some risk aversion as anti-government protests continued in Bahrain and unrest spread through Iran and other countries in the Middle East.

"The contagion effect that many feared now appears to have come to fruition, with Bahrain the latest flashpoint," said Gavan Nolan, analyst with Markit, in a report. "Though small, Bahrain is of strategic importance and the developments there merit watching. Its spreads continued to widen sharply today, though liquidity was said to be thin due to the UAE holiday."

Also having an impact on market sentiment were reports that the U.S. consumer price index and core prices rose more than expected in January. And jobless claims climbed for the week ended Feb. 12.

Still, "a generally light risk-on mood globally prevailed on Thursday," according to a report from RBC Capital Markets.

The JPMorgan Emerging Markets Bond Index Plus spread tightened 2 basis points, with Argentina down 18 bps and Venezuela tighter by 8 bps.

Said a New York-based market source: "Buying is better. The market is trading OK."

Baroda prints notes

Mumbai, India-based lender Bank of Baroda priced $500 million 5% senior notes due Aug. 24, 2016 at 99.407 to yield 5 1/8%, or Treasuries plus 285 bps, a market source said.

The notes priced on the lower end of guidance, which was set at Treasuries plus 285 bps to 290 bps.

Barclays Capital, Citigroup, HSBC, JPMorgan and Standard Chartered were the bookrunners for the Regulation S deal.

This followed the late Wednesday pricing by Ukraine of $1.5 billion senior notes due Feb. 23, 2021 at par to yield 7.95%, or Treasuries plus 362.5 bps, a market source said.

The deal priced in line with talk, which was set at the 8% area.

JPMorgan, Morgan Stanley and VTB Capital were the bookrunners for the Rule 144A and Regulation S deal.

"That deal went well," a London-based market source said. "After an initial surge it has settled back about ½ a point up."

The final book was $3.5 billion, according to a press release from VTB Capital. About 250 investors, primarily asset management companies in the United States, took part in the deal.

RKI Finance plans deal

In other deal news, China's RKI Finance Ltd., a subsidiary of Hong Kong-based toll road and property company Road King Infrastructure Ltd., is planning a renminbi-denominated issue of notes, according to a company announcement.

Deutsche Bank, JPMorgan, BBVA and Citic Bank are the bookrunners for the deal.

Proceeds will be used for refinancing debt, for investing in Road King's toll business and a new expressway project in Shanxi Province and for general corporate purposes.

Also from China, the upsized $900 million 11 1/8% seven-year notes that priced Wednesday from Hong Kong's Country Garden Holdings - which came to market at 99.405 to yield 11¼% - was on the market's radar screen on Thursday.

Goldman Sachs, JPMorgan and Deutsche Bank were the bookrunners for the Rule 144A and Regulation S notes, which are callable at 105.56 on Feb. 23, 2015.

"That's up about a point or so," a New York-based market source said. "So that's good."

Bahrain trades down

Bahrain remained in focus on Thursday after protestors were attacked and the government warned people to stay off the streets of the capital city, Manama. The day also saw 18 members of the Shiite Muslim party stepping down from parliament.

Bahrain's 2020 bonds were trading at 93.50 bid, 94.50 offered early in the European session and were later seen at 93.25 bid, 94.25 offered. On Wednesday the notes were trading at 93.50 bid, 94.50 offered.

Bahrain-based lender BBK's 2015s - which priced at 98.912 to yield 4.74% on Oct. 21 - were trading Thursday at 95.50 bid, 96.50 offered.

"We actually traded all of these bonds at some stage yesterday," a London-based trader said. "It shows how the street was short those BBKs."

Dubai corporates hold well

Dubai's corporates had a decent showing on Thursday.

"Dubai Inc. is holding well in the face of regional tensions," the trader said.

Dubai's 2014s were seen trading at 100.25 bid, 101 offered. The 2015s were trading at 99.75 bid, 100.500 offered, and the 2020s were trading at 95.75 bid, 96.5 offered.

Dubai Water and Electricity Authority's 2015 notes were seen at 107 bid, 107.75 offered and its 2016s at 99 bid, 99.50 offered. The company's 2020 notes were trading at 95 bid, 95.75 offered.

And Dubai's Emaar Properties' 2016s were higher at 99 bid, 99.50 offered after trading last week at 98.62 bid, 99.12 offered.

IPIC active

In other news from the Middle East, International Petroleum Investment Co. agreed to increase its ownership of Spanish oil company Cia. Espanola de Petroleos SA (Cepsa). IPIC already owns 47% of the company but will now buy out French oil company Total SA, which has a 48.8% stake.

In response, IPIC's bonds were active on Thursday.

"We saw decent demand on IPIC's 2015s and 2020s," the London-based trader said. "That's a credit that trades pretty well. It's only 7 to 9 [bps] wider over the month but a good 5 to 7 [bps] tighter yesterday."

IPIC's 2015s were trading Thursday at 97 bid, 97.5 offered while its 2020s were seen at 96.50 bid, 97.25 offered.

Brazil trades up

Meanwhile, some Latin American names had a fairly good day, a New York-based market source said.

"We saw improved price action and tone in the market yesterday as spreads in general tightened across the board in Latin American credits," he said.

Brazil stood out, with its 2021 bond trading at 101.15, up from 100.75.

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