Winsway Coking, SPG Land, Montenegro, Lotte sell notes; U.S. data boost market sentiment

By Christine Van Dusen

Atlanta, April 1 - Hong Kong's Winsway Coking Coal Holdings Ltd., China's SPG Land Holdings Ltd., Montenegro and South Korea's Lotte Shopping Co. Ltd. printed notes on Friday as emerging markets assets started off the new quarter on solid footing.

Helping to improve market sentiment overall were the better-than-expected payroll numbers from the United States. About 216,000 jobs were added in March, the most in almost a year. And the unemployment rate dropped to 8.8% from 8.9%.

Ahead of these reports, positive sentiment was seen in the Asian and European markets, according to RBC Capital Markets. But debt spreads remained flat, with the JPMorgan Emerging Markets Bond Index Plus spread at Treasuries plus 256 basis points.

After the reports, spreads in emerging markets tightened by 10 bps to 15 bps.

"It's been a solid tone and solid week, spread-wise," a London-based trader said.

Winsway prices notes

In its new deal, Hong Kong-based coking coal importer Winsway Coking Coal priced $500 million notes due April 8, 2016 at par to yield 8½%, a market source said.

Deutsche Bank, Merrill Lynch, Goldman Sachs and ICBC International were the bookrunners for the Rule 144A and Regulation S notes, which are non-callable for three years.

About 60% of the proceeds will be used to finance investments in rolling stock, other transportation-related vehicles and railway-related infrastructure, 25% to finance investments in upstream resources through new acquisitions and/or joint venture projects and to otherwise secure upstream supplies, and 15% for working capital and general corporate purposes.

SPG Land, Montenegro price

In another new deal on Friday, China-based property developer SPG Land Holdings priced $200 million 13½% notes due April 8, 2016 at 98.244 to yield 14%, a market source said.

Morgan Stanley and Nomura were the bookrunners for the Regulation S-only deal.

Proceeds will be used to repay certain offshore loans and for general corporate purposes.

The deal had originally been expected to price in late March but was postponed.

And Montenegro sold €180 million 7¼% notes due April 8, 2016 at 99.492 to yield 7 3/8%, a market source said.

HSBC and JPMorgan were the bookrunners for the Regulation S-only deal, which priced in line with talk, set at the 7 3/8% area.

Lotte does deal

Also on Friday, South Korea-based retail operator Lotte Shopping priced $400 million 3 7/8% notes due April 7, 2016 at 99.327 to yield 4.025%, or Treasuries plus 180 bps, a market source said.

The notes came in at the tight end of talk, which was set at the Treasuries plus 180 bps to 195 bps area.

BNP Paribas and Citigroup were the bookrunners for the Regulation S notes.

This deal followed the late Thursday pricing of Brazil-based cement manufacturer Votorantim Cimentos SA's $750 million 7¼% notes due 2041, which came to market at 99.395 to yield 7.3%, or Treasuries plus 278.1 bps.

The notes priced at the tight end of talk, which was set at the 7½% area.

Merrill Lynch, Itau and JPMorgan were the bookrunners for the Rule 144A and Regulation S transaction.

Kerry, ICBC sell notes

Also on Thursday, Hong Kong-based property developer Kerry Properties Ltd. priced $300 million 5 7/8% notes due April 6, 2021 at 99.537 to yield 5.937%, or Treasuries plus 250 bps, a market source said.

BOCI, Deutsche Bank and HSBC were the bookrunners for the Regulation S notes.

And Industrial and Commercial Bank of China Ltd. sold $260 million notes due April 7, 2014 at par to yield Libor plus 80 bps, a market source said.

Standard Chartered was the bookrunner for the notes.

In other deal-related news, Brazil's Banco Bonsucesso SA mandated JPMorgan and Santander for a roadshow starting Tuesday, a market source said.

The marketing trip will start in New York and London and then travel to Boston, Zurich, Geneva, Los Angeles and Lisbon before concluding on April 8 in Miami.

Ferrexpo in demand

One trader was keeping tabs on Friday on the new $500 million five-year senior guaranteed bullet notes from Switzerland-based iron ore pellet company Ferrexpo Finance plc. The notes priced on Thursday at par to yield 7 7/8% via JPMorgan, Morgan Stanley and UBS.

The final book for the deal was $3 billion from 250 orders, with 55% from Europe, 38% from the United States and 7% from Asia. Funds accounted for 72%, private banks 14% and others 2%.

The notes from the Ukraine-focused company opened Friday at 100.75 bid, 101.75 offered. Later in the session, they were seen at 101.40 bid, 101.60 and then 101.35 bid, 101.55 offered.

"They were fading a little bit there," the trader said.

By the end of the day the notes were trading at 101.22 bid, 101.37 offered.

Buying for Isbank, Akbank

Another trader noted strong activity in Turkey's sovereigns and corporates, with better buying of Turkey-based Isbank's 2016s and Akbank's 2018s.

"Just before the payrolls announcement, the Akbanks were trading at 1023/4. Isbank has had a nice little rally since the morning," he said.

"Sovereign bonds were lagging behind the corporates in terms of activity until the afternoon, but we saw a large bid-wave in the afternoon across the long end of the curve with both locals and foreigners bidding aggressively," he said.

IPIC firm

In other trading on Friday, International Petroleum Investment Co.'s new notes were firm, the London-based trader said.

"That kicked up 10 to 13 bps tighter this afternoon as some decent demand on the 2021 euro notes drove the rest of the curve tighter," he said. "The sterling tranche still lags a little, but even that has felt supported this week and could really pop if a couple of big real money accounts get involved."

Qtel International's 2025 dollar notes were on the move, trading at 89 bid, 89.50 offered. "That's 20 bps tighter on the week," he said.

Bonds from Bahrain and Saudi Arabia were also well supported on Friday. "The Bahrain '20 dollar notes are now 63 bps tighter on the month," he said.

Looking to Africa, he noted demand for Gabon, Ghana and Nigeria. "The latter closed at 100.40 bid, 101 offered, tighter by 25 bps," he said.

Middle East in focus

In a deeper look at the Middle East, Barclays Capital favors Abu Dhabi and Qatar as safe havens in the region. In particular, Abu Dhabi National Energy Co. is a good bet, as the rising price of oil is likely to benefit the company.

The energy company "also continues to benefit from its stable, high-margin UAE utility business in which gas is provided at no cost by the Abu Dhabi Water and Electricity Authority," Barclays Capital said in a report.

Qtel is another good option, Barclays said, particularly the issuer's 19s and 20s.

"Qtel offers higher ratings and more potential upside relative to global peers," the report said. "Qtel has repriced wider on turmoil in the Middle East and we believe it is likely to tighten back when the turmoil in the region subsides."

Caution urged, inflows up

Though EM corporate assets have stayed fairly resilient against a geopolitical backdrop that's been challenging at best, it's still wise for investors to favor a cautious approach, according to the Barclays report.

"We maintain our cautious view on corporate credit," the report said. "EM corporate spreads today look too tight versus other emerging market asset classes, notably EM dollar sovereigns and EM equities. In light of the higher risks and this outperformance, we do not think adding risk today makes sense."

That said, EM bond funds continue to see very strong inflows, with a total of $441 million for the week ended March 30, a vast improvement over the previous week's outflows of $145 million, according to a report from data tracker EPFR Global.

"The technical backdrop for this asset class is, for the moment, undeniably strong," Barclays said. "For the rest of the year, we forecast positive excess returns and moderate spread tightening.

"The catalyst for becoming more positive could be a modest correction in spreads - we believe 30 bps is reasonable - a rally in other EM asset classes, or a reduction in tail risks. But we believe a greater degree of vigilance is required. And with beta unlikely to be the main source of return in the short run, name selection is more critical than ever."

© 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.