KOKS prints notes as Greece's troubles take toll on EM; Dubai deal deemed a 'failure'

By Christine Van Dusen

Atlanta, June 16 - After months of ignoring the headlines about Greece and the global economy, emerging markets assets on Thursday finally reacted to all the bad news, leading to a slower pace of new issuance and wider spreads.

Russia's KOKS Group was alone in pricing new notes during the session, though several other issuers did manage to advance deals, including China's Rainbow Days Ltd., Prague's Czech Railways, the Republic of Colombia, Indonesia's PT Tranka Kabel and Dubai's Majid Al Futtaim Holding LLC.

"Greece's debt crisis remains the dominant theme ... with risk assets coming under further pressure after heavy losses overnight," according to a report from RBC Capital Markets. "Political uncertainties in Greece, with the government facing a confidence vote early next week, spilled over to EM this morning."

The JPMorgan Emerging Markets Bond Index spread moved up 5 basis points on Thursday to close at Treasuries plus 297 bps, with Argentina wider by 27 bps and Venezuela by 13 bps.

"We're finally starting to see a reaction in emerging markets to the greater concerns," an emerging markets strategist said. "Most things are clearly on hold."

Trading was mixed, sources said.

"Things are a little rough today," a New York-based trader said. "I'm hoping the Greece contagion doesn't worsen from here."

KOKS sells bonds

In its new deal, Russia-based coke and pig iron producer and miner KOKS Group sold $350 million 7¾% notes due June 23, 2016 at par, a market source said.

The deal came in below price whispers, which were first set at the 8½% area and then tightened to 8%.

Bank of America Merrill Lynch, Credit Suisse, Troika Dialog and VTB Capital were the bookrunners for the Rule 144A and Regulation S notes.

Proceeds will be used for the repayment of secured debt.

The notes were initially expected to be issued in rubles.

"One indicator of how developed this market has become is that KOKS is still managing to get their five-year dollar notes away in the middle of all this [market turmoil,]" a trader said.

Rainbow Days, Czech Rail eyed

Also on Thursday, China's Rainbow Days mandated Bank of China, Deutsche Bank and Standard Chartered Bank for an issue of renminbi- or dollar-denominated notes, a market source said.

The Regulation S deal - guaranteed by China-based commercial bank China Merchants Bank Co. Ltd. - is expected to launch if market conditions are favorable.

Prague-based railway company Czech Railways set the maturity for its planned issue of €300 million notes at five years, a market source said.

Barclays Capital, Erste Group and Societe Generale are the bookrunners for the Regulation S notes, which include a change-of-control put at 100% if the government ceases to own 75% or if a restructuring event results in a downgrade below investment grade.

And Dubai-based real estate developer Majid Al Futtaim mandated Barclays Capital, Credit Agricole, HSBC and Standard Chartered Bank for a roadshow in the United Arab Emirates, Asia and Europe, a market source said.

The company recently announced the establishment of a $2 billion medium-term note program.

Tranka Kabel sets guidance

Thursday also saw Indonesia's Tranka Kabel set price talk for its planned issue of five-year senior secured dollar notes at the low 14% area, a market source said.

BNP Paribas and DBS Bank are the bookrunners for the Regulation S-only notes, which are non-callable for three years.

Proceeds will be used for the repayment of existing debt of about $135 million, for funding the interest reserve account and for general corporate purposes.

The notes are guaranteed by PT Aluco, a copper and aluminum rod fabricator based in West Java, Indonesia.

"There are very few new issues out, just 13 so far this month versus 27 a month ago," the strategist said.

Colombia mandates leads

In other deal-related news, Colombia mandated Bank of America Merrill Lynch, Barclays Capital and Citigroup for a roadshow starting Monday, a market source said.

The marketing trip will begin in Los Angeles and travel to New York and Boston before wrapping up on June 23 and June 24 in London.

No other details were immediately available on Thursday.

And the final book for the recent $500 million 6.2% notes due 2021 issued by Brazil's Itau Unibanco Holding SA (Cayman Islands branch) was more than $2.7 billion, a market source said.

The lender priced the notes at 99.764 to yield 6.231%, or Treasuries plus 315 bps, via Bank of America Merrill Lynch and Itau BBA in a Rule 144A and Regulation S transaction.

Proceeds will be used for general corporate purposes.

Turkish names drift down

In trading, Turkey's financial corporates were all between 15 bps and 25 bps wider on Thursday morning. Some retail interest was seen for Yuksel Insaat AS' 2015 notes.

"Compared to Russia and Ukraine, significantly less volume is going through while screen prices are going down," a trader said. "Banks are extending their losses. Corporates were drifting down on the screens with little actual activity."

Market-watchers were keeping an eye on the upcoming issue of notes from Istanbul-based lender Denizbank AS, which expects to issue benchmark-sized bonds during the June 20 week. Bank of America Merrill Lynch, Citigroup, HSBC and JPMorgan are the bookrunners for the Rule 144A and Regulation S deal.

"It'll be interesting to see Denizbank's performance once it's launched," a trader said.

On the sovereign side, Turkey's curve recouped some earlier losses with solid volumes, he said.

African Bank, Dubai weaker

Meanwhile, South Africa's banks were taking a hit, a trader said.

"African Bank gets spanked. It's 100 bps wider from launch now," he said. "But the rest is doing OK."

Said another trader: "The South Africa sovereign is putting in a good performance, only 5 to 7 bps wider."

In other news, the new issue of 5.591% notes due 2021 from Dubai - which priced June 15 at par - were seen about 3/8 of a point below reoffer on Thursday.

"That was a real failure," the strategist said. "They originally had been trying to tap the market for $1 billion and couldn't, so they had to come to the market for only half that and still performed badly."

But, a trader said, "given how firm the rest of the Dubai curve is, this bond will perform in time."

In other trading on Thursday, Russia-based Alfa Bank's curve flattened.

"It may be a good credit, but right now the Street has been tagged with paper," a trader said.

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