NTPC, Kookmin, Israel price notes amid good liquidity; Severstal, Braskem offerings ahead

By Christine Van Dusen

Atlanta, July 7 - The bond issuance pipeline in emerging markets opened at a trickle - with deals from India's NTPC Ltd., South Korea's KB Kookmin Bank and Israel - and investors began to embrace risk on Thursday as Portugal's downgrade faded into the background and positive jobs data from the United States offered encouragement.

"It was a fairly solid day, for the most part," a London-based trader said, noting that spreads were benefitting from the move in U.S. Treasuries. "There's still good liquidity; however, once again it's a very technical market where every bond has its own little dynamics."

Said another trader: "An initial wave of selling on the back of Portugal blowing out to above 1,000 [bps] on five-year credit default swaps has been replaced with very good buying across the board."

Thursday also saw several issuers advancing deals, including Russia's OAO Severstal and Brazil's Braskem SA, as well as three Argentine corporates: Arcos Dorados Holdings Inc., Celulosa Argentina SA and YPF SA.

NTPC, Kookmin print notes

In its new deal, India-based power generator NTPC sold $500 million 5 5/8% senior fixed-rate notes due July 14, 2021 at 99.359 to yield 5.71%, or Treasuries plus 255 basis points, a market source said.

The notes priced below guidance, which was set at the Treasuries plus 265 bps area.

Barclays Capital, Citigroup, Deutsche Bank and RBS were the bookrunners for the Regulation S-only notes.

And South Korea-based lender Kookmin Bank priced $300 million 3 5/8% fixed-rate senior notes due Jan. 14, 2017 at 99.114 to yield 3.805%, or Treasuries plus 208 bps, a market source said.

The notes priced below talk, which was set at the Treasuries plus 215 bps area.

BNP Paribas, JPMorgan, ING, RBS and UBS were the bookrunners for the Regulation S notes.

Israel sells bonds

In another new deal on Thursday, Israel sold $400 million 1.599% notes due July 11, 2012 at par, according to a filing from the sovereign.

Goldman Sachs was the bookrunner for the Regulation S transaction.

Also on Thursday, Brazil launched a $500 million tap of its 4 7/8% notes due Jan. 22, 2021 at Treasuries plus 105 bps, a market source said.

Goldman Sachs and Santander are the bookrunners for the Securities and Exchange Commission-registered deal.

Agroton, Korea Hydro do deals

This news followed the Wednesday pricing of Ukraine-based agriculture company Agroton plc's $50 million senior notes due July 14, 2014, which came to the market at par to yield 12½%, a market source said.

The notes - via Dragon Capital, UBS and VTB Capital - priced above talk, which was set at the 12% area.

And Seoul-based Korea Hydro & Nuclear Power Co. sold $500 million 4¾% notes due July 13, 2021 at 97.591 to yield 5.06%, or Treasuries plus 195 bps, a market source said.

The notes came in below talk, which was set at Treasuries plus 200 bps to 210 bps.

Barclays Capital, Goldman Sachs, Morgan Stanley and RBS were the bookrunners for the Rule 144A and Regulation S notes.

Severstal taps bookrunners

In other deal-related news, Russia-based steel and mining company Severstal mandated Goldman Sachs and Barclays Capital for a dollar-denominated offering of notes.

The notes are expected to total at least $500 million.

A roadshow will be held from July 8 to July 11.

"Severstal's mandate is not denting their bonds in the secondary," a trader said.

Arcos Dorados sets guidance

From Latin America, Argentina-based McDonald's franchisee Arcos Dorados Holdings set price talk for its five-year offering of real-denominated notes at the 10 5/8% area, a market source said.

Bank of America Merrill Lynch, Itau and JPMorgan are the bookrunners for the Rule 144A and Regulation S notes, which could price as early as the July 11 week.

The notes will be payable in dollars, and the proceeds will be used for capital expenditures, general corporate purposes and the possible unwind of cross-currency swaps.

Also from Argentina, paper and pulp company Celulosa Argentina is on a roadshow for a planned issue of $150 million notes due 2018 via Citigroup and Credit Suisse in a Rule 144A and Regulation S deal.

The roadshow for the notes - which will be non-callable for four years - started July 7 in London and travels to Zurich, Geneva, Boston and New York before concluding on July 13.

Proceeds will be used to repay $115 million of loans, refinance debt and acquire industrial assets, as well as for working capital and capital contributions.

YPF, Braskem advance deals

In more news from the region, Argentina-based oil and gas company YPF mandated BNP Paribas, Citigroup, Credit Suisse, ING, Itau, Santander and Standard Bank for a dollar-denominated offering of eight-year notes.

A roadshow for the Rule 144A and Regulation S offering will take place from July 8 to July 13.

And Brazil-based petrochemical company Braskem announced plans to hold a roadshow from July 11 to July 13 with bookrunners Bank of America Merrill Lynch, HSBC and Morgan Stanley, a market source said.

The marketing trip will be held on the West Coast and in Chicago, Boston and New York.

CLP Power oversubscribed

The final book for electric company CLP Power Hong Kong Ltd.'s recent issue of $300 million 4¾% senior notes due July 12, 2021 - which came to the market at 99.324 to yield 4.836% - was $2.65 billion with more than 175 accounts involved, a market source said.

About 78% of the orders came from Asia and 22% from Europe. Funds accounted for 44%, insurers and pensions 20%, central banks and agencies 15%, private banks 11% and banks 10%.

Deutsche Bank, HSBC, RBS and Standard Chartered were the bookrunners for the Regulation S notes.

IPIC widens, Kipco solid

In trading on Thursday, Abu Dhabi's International Petroleum Investment Co. (IPIC) saw its 2021 euro notes trading between 99.65 and 99.80, 20 bps wider on the month.

"These bonds still look like an OK value, but they just can't seem to muster much of a spread rally," a trader said. "They are 25 bps wider from launch."

From Kuwait, Kipco's 2016 notes had another solid day, trading with a 113 handle, he said.

"That's still seeing good demand," he said. "It's going to take a disaster for it not to be the bond of the week."

Dubai, Qatar tighten

In other trading from the Middle East, Dubai opened 4 bps to 6 bps tighter while names from Qatar were tighter by 2 bps to 4 bps.

"The sovereign is going well as U.S. Treasuries sell off," a trader said.

Better buying was seen for Abu Dhabi National Energy Co.'s 2016s and Abu Dhabi Islamic Bank's 2015s.

"They had a solid day," he said.

BTA Bank in focus

Kazakhstan's BTA Bank was in focus on Thursday following the news that wealth fund Samruk-Kazyna will prop the lender up in order to avoid a default like the one seen in 2009, a market source said.

"No further detail was given as to how that will happen," a trader said. "This statement was widely awaited by investors and should increase investor confidence in the liquidity of the bank and the sector as a whole."

In response BTA's 2018 notes and 2025 notes were each up 9 points, and JSC Kazkommertsbank's 2018s were up 2 points.

"These are fast markets," another trader said. "BTA is stealing the limelight again."

Turkey sees buying

Looking to Turkey, very resilient price action was seen for the sovereign's bonds.

"After the initial weakness in the morning, the sovereign curve saw very good buying, particularly at the belly of the curve," a trader said.

"Corporates are pretty much unchanged, with banks seeing better support on the Street, especially Garanti Bankasi AS' 2021, which are creeping up slowly each day," a trader said.

The lender's 2021 notes were seen trading on Thursday at 97.50 bid, 98 offered after pricing on April 14 at 98.086.

"Very impressive volume [for the banks] is going through after a period of relative inactivity," he said. "That must bode well for the pending supply."

And from Russia, Bank of Moscow's bonds were a particular standout on Thursday.

"They're on fire today," a trader said. "I cannot believe how strong the subordinated 2015s and 2017s are."

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