EM see ‘massive’ swings, volatility; Chile, China Energy, Ping An Real Estate tap market

By Christine Van Dusen

Atlanta, Jan. 11 – Chile, China Energy Reserve and Chemicals Group Co. Ltd. and China’s Ping An Real Estate Co. Ltd. sold notes on a topsy-turvy Tuesday for emerging markets assets – a day that saw some credits fall and then rally while others just suffered amid lower commodity prices.

“As markets continue to see massive intraday swings, it becomes increasingly difficult to navigate price action and source liquidity,” a trader said. “With volatility spiking and looming issuance, this is likely to be the trend for at least the near future.”

Brazil's five-year credit default swaps spreads tightened to 488 basis points from 490 bps while Mexico's moved to 188 bps from 190 bps, a trader said.

But Venezuela continued to sell off on oil weakness and worries about the sovereign’s debt load, he said. The sovereign’s 2027s closed at 36 from 38, and PDVSA's 2017s finished at 45.25 from 48.75.

“Wild ride,” he said.

Brazil-based Vale SA was in the news after drawing down $3 billion from its $5 billion revolving credit facility as it struggled to close the sale of its coal business in Mozambique.

“Liquidity right now is not only credit-specific but also bond-specific, but at least there is some,” a trader said.

Chile-based Codelco SA widened on Tuesday as copper prices continued to plummet, he said, and Mexico-based Cemex SAB de CV traded lower.

“The concern here is the possibility for lower global growth, combined with the weakening [currency],” he said. “Cemex, however, is still on track with deleveraging, with strategic non-core asset sales and improving financial flexibility as debt ratios improve.”

Ukraine’s liquidity declines

Looking to Ukraine, liquidity for sovereign bonds has declined somewhat so far this week, said Fyodor Bagnenko, a fixed income trader with Dragon Capital.

“Quasi-sovereign banks were also better bid in parallel, with the spread pickup becoming hard to resist,” he said. “Corporates saw modestly higher levels but were quiet overall.”

Oil credits still struggle

Oil-related credits continued to struggle as prices dropped and sanctions imposed by Iran on the Islamic Republic neared their end.

“The lifting of sanctions would also come at a time of rising tensions in the Middle East, following the cut-off of relationships between Saudi Arabia and Iran,” a strategist said. “Iran has stated that it would increase its [oil output] within weeks after sanctions are lifted.”

This, he said, would “potentially add further pressure on oil prices and oil exporting countries.”

Nigeria would be among those affected countries, and could borrow as much as $4.5 billion in debt markets to finance the budget deficit, a trader said.

CSN in focus

Investors were also keeping an eye on Brazil’s Companhia Siderurgica Nacional, which is selling a container terminal and faces a challenging price environment, according to a report from Schildershoven Finance BV.

“Investors should be very cautious when considering investing in CSN’s bonds, despite positive expectations over the sale,” the report said.

CSN has reportedly received 10 offers.

“There are no details on the value of the offers,” the report said. “The fact that there are a lot of potential buyers for CSN’s assets is positive for the company. We expect a substantial positive market reaction to the successful close of the deal.”

Even so, “we recommend our clients to be very cautious while investing in the company, as current steel prices and prospects for iron ore negatively affect the company’s economic performance,” Schildershoven said.

Chile prices euro notes

In its new deal, Chile priced €1.2 billion 1¾% 10-year notes at 98.056 to yield mid-swaps plus 110 bps, according to a filing from the sovereign.

BofA Merrill Lynch, Citigroup, HSBC and Santander are the bookrunners for the Securities and Exchange Commission-registered deal.

A benchmark-sized issue of dollar notes due in 10 years, which was talked at Treasuries plus 140 bps, is expected to follow.

The proceeds from the dollar notes will be used for general governmental purposes and to pay the purchase price for certain outstanding debt securities of Chile that are validly tendered and accepted in the offer. The proceeds from the euro notes will be used for general purposes of the government.

China Energy sells bonds

In another new deal, China Energy Reserve and Chemicals Group sold $400 million three-year notes at par to yield 6 1/8%, a market source said.

Barclays, Wing Lung Bank, Shanghai Pudong Development Bank, Haitong International and China Securities International were the bookrunners for the Regulation S deal.

Ping An does deal

China’s Ping An Real Estate priced a $1.2 billion issue of three- and five-year notes, a market source said.

The $700 million 2 3/8% notes due in 2019 priced at a spread of 125 bps over Treasuries. Other details on this tranche were not immediately available on Tuesday.

The $500 million 2 7/8% notes due 2021 priced at 99.323 to yield Treasuries plus 140 bps.

HSBC, BofA Merrill Lynch and CICC HK Securities were the bookrunners for the Regulation S deal.

The issuer is based in Shenzhen, China.

Ascendas releases order book

The new issue of notes from Singapore’s Ascendas Real Estate Investment Trust – S$200 million 3½% notes due 2023 that priced on Monday at par – drew an order book of more than S$270 million from 38 accounts.

The notes were talked at a yield in the 3.65% area.

DBS, Mizuho Securities, OCBC Bank and UOB were the bookrunners for the Regulation S deal.

Ascendas is a business space and light industrial real estate investment trust with a diversified portfolio of 17 properties in Singapore.

© 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.