KOKS preps deal; Greece misses payment as bailout expires; Pacific Rubiales battle goes on

By Christine Van Dusen

Atlanta, June 30 – Russia’s KOKS Group readied a new deal on Tuesday as Greece’s bailout program expired and the debt-saddled sovereign missed its payment to the International Monetary Fund. Adding to the tension was news that the German chancellor said it was too late to negotiate with Athens about a new bailout program before the July 5 referendum.

With this as the backdrop, Asian bonds put in a “slightly more constructive” session on Tuesday morning, with spreads consolidating after the previous day’s move wider, a London-based trader said.

“Some recent issues remain under pressure,” he said. “Older issues are gathering some offers in the Street.”

Among Asian sovereigns, Philippines’ long-dated bonds have been narrowing, moving in as much as 30 basis points since June 16, he said.

“Indonesia’s long end has tightened 40 bps since last Wednesday, however this has retraced around 50% of the move, causing dealers to step in on the bid here,” he said. “Overnight flows were balanced, so locals seem to be the driver here.”

Indonesia’s 2043s outperformed, moving up 1 point.

The tone remained fairly solid into the end of the Asian session, with slightly better buying of investment-grade names and some two-way activity for weakened bonds, he said.

Liquidity, he said, returned “just a little.”

“New issues are still a touch soft,” he said. “But on the whole we saw some risk addition, except for Korea and India short end.”

By the end of the day, sentiment seemed to rebound and flows picked up, primarily for corporate bonds, a trader said.

“Investment-grade corporates were generally 2 bps tighter across, with decent demand in oil, but tech still feels a bit heavy,” he said.

Pacific Rubiales in focus

Looking to Latin America-focused Pacific Rubiales Energy Corp., a few Street prints were sighted on Tuesday at lower levels, a New York-based trader said.

Bondholders continue to argue about whether the takeover bid from Mexico’s Alfa SAB de CV and Harbour Energy Ltd. is big enough and whether the deal should go through.

“Current bondholders are telling you a very clear story here, which is that they themselves might think it should go through fundamentally, but there are enough ‘obstacles’ in the way to keep that from happening,” he said.

Lat-Am tightens

In other trading from Latin America, most low-beta spreads tightened on the day as some cautious optimism returned to the markets, another trader said.

Five-year credit default swaps spreads for Brazil closed at 261 bps from 269 bps, while Mexico’s moved to 131.50 bps from 133.50 bps.

High-yield names had an uneventful day, with Argentina and Venezuela mostly unchanged, he said.

KOKS Group gives guidance

Russia’s KOKS Group set initial talk at 12½% to 13% for a dollar-denominated issue of notes due in 3½ years, a market source said.

Citigroup, Renaissance Capital and Sberbank are the bookrunners for the Regulation S deal.

KOKS Group is a coke and pig iron producer and miner based in Moscow.

Bohai Leasing plans deal

China’s Bohai Leasing Co. Ltd. has mandated Bank of China International, Citic CLSA Securities, DBS, Guotai Junan and Hong Kong International Securities as bookrunners for an issue of notes, a market source said.

A roadshow for the Regulation S deal concluded on June 24.

The Urumqi-based issuer finances the leasing of aircraft, ships and other transportation equipment.

Posadas releases final book

The recent issue from Mexico-based hotel operator Grupo Posadas SAB de CV – $350 million 7 7/8% notes due in 2022 that priced at par – drew an order book of $851 million, a market source said.

About 73% of the orders went to the United States and Canada; 21% to Europe, the Middle East and Africa; 3% to Asia Pacific; and 3% to Latin America.

Asset managers picked up 62%, hedge funds 29%, private banks and banks 5%, pension funds 3% and insurers 1%.

Citigroup, BofA Merrill Lynch and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

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