Unigel notes offering ‘missing in action’; Russia pricing $4 billion new notes, 2047 tap

By Rebecca Melvin

New York, March 16 – Unigel Participacoes SA’s dollar benchmark offering of seven-year notes was ‘missing in action’ on Friday after pricing for the deal for the Brazilian commodity chemical producer failed to materialize following the conclusion of roadshow meetings and price talk on Wednesday.

The deal had been talked at $400 million in size to yield in the area of 8%.

“I heard it was missing in action,” a New York-based market source said.

Bookrunners Morgan Stanley and UBS Investment Bank would not comment on the deal.

A New York-based syndicate source, away from the deal, said, “It was a tough sell, I think. The market is relatively soft, and this was a single B company that had just come out of a restructuring process.”

Fitch Ratings said its rating on the company was based on Unigel’s small business-scale relative to larger and more diversified global petrochemical peers. But that positives for the company are its vertically integrated operations in the acrylics and styrenics businesses, some operational flexibility, an established market position in Brazil and a diversified portfolio of customers and end markets.

The Latin America region had three deals on the calendar this past week. On Monday, Brazil’s Itau Unibanco Holding SA priced $750 million of perpetual tier 1 subordinated notes (expected ratings: B2//B) at par on top of price talk for a 6½% yield. And Peru LNG SRL priced $940 million of 12-year notes (expected ratings: Baa3/BBB-/BBB-) at par on Thursday to yield 5 3/8%.

Market players had been anticipating the Unigel deal to provide a good gauge of market sentiment.

“There have been very weak primary executions in U.S. investment grade. The market is not feeling good right now, but I’m not really sure what is driving it,” a New York-based market source said.

Meanwhile, demand for Russian paper was resilient this past week in the face of mounting political tensions between that country and the West. On Friday, Russia was pricing new 11-year notes and a tap of its notes maturing in 2047. Guidance on the $1.5 billion of sovereign 11-year notes was tightened to 4 5/8% to 4¾% from initial talk in the area of 4¾%. And 5½% yield was expected on the $2.5 billion tap of Russia’s existing 2047 notes, in line with initial talk.

The sovereign deals were following PJSC Gazprom, which was able to price a bigger than expected €750 million of eight-year notes on Wednesday at par to yield 2½%.

Political tensions surrounding Russia have contributed to capital outflows and the depreciation of foreign exchange reserves. But at the same time, S&P Global’s upgrade of Russia has bolstered participation. S&P upgraded Russia’s foreign-currency ratings to BBB- on Feb. 23, lifting it to investment-grade status and thereby expanding the pool of investors to include those with investment-grade index mandates.

Books for the Russia notes were closing on Friday.

Russia was also tendering for its 7½% bonds due 2030 via an intermediated exchange. The maximum to be paid in the tender will be set equal to the gross proceeds from the new deal.

Elsewhere, Globalworth Real Estate Investments Ltd. announced that it has selected banks and started a roadshow for an offering of euro-denominated debt securities, subject to market conditions.

Deutsche Bank, JPMorgan, Morgan Stanley and UBS Investment Bank are managing the meetings with fixed income investors starting on Friday.

The Guernsey-based real estate company focuses on properties located in Poland and Romania.

Secondary market spreads were mixed on Friday as they had been for much on the week. U.S. Treasuries slipped following stabilization on Thursday and three days of gains ahead of that.

“Mixed bag,” a trader said.

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