Good day for EM as oil rallies; Alternatifbank sells notes; IMF calls global growth ‘sluggish’

By Christine Van Dusen

Atlanta, April 12 – Turkey-based Alternatifbank AS sold notes on Tuesday as oil rallied, the International Monetary Fund released an economic update and a congressional committee in Brazil voted in favor of proceeding with the president’s impeachment process.

The IMF found that “global growth continues, but at a sluggish pace that leaves the world economy more exposed to risks,” according to the semi-annual World Economic Outlook.

Against this backdrop, Latin America put in a “stellar session” on the strength of the oil rally, a New York-based trader said.

And even as Brazil’s political turmoil continued, five-year credit default swaps spreads for the sovereign tightened to 355 basis points from 373 bps, while Mexico’s moved to 162 bps from 172 bps.

“Cash prices take spread-tightening in stride and grind higher as United States Treasury weakness does little to deter the overall bid,” he said. “Lat-Am high yield also finishes higher on the day, with Venezuela getting a solid boost from the oil rally.”

Indeed, the sovereign’s 2027s traded at 38.25 from 37.50, and PDVSA’s 2017s were up to 53.50 from 52.75.

“It was a bit surprising that Venezuela and PDVSA didn’t see more of a jump today, which may be a reflection of the credit risks, despite some stability in crude market,” he said.

Argentina moved higher, with its Bonar 2024s trading at 109.25 from 108.75.

“Good two-way flows for the session, with better buyers more dominant than sellers,” the New York trader said. “Risk assets feel strong and oil is now breaking through key technical levels, which may signal the next leg higher in this rally.”

Global Ports notes tick up

Russia-focused Global Ports Investments plc’s new issue of $350 million 6 7/8% notes due in January of 2022 that priced Monday at par to yield 6 7/8% traded at 100.60 bid, 100¾ offered on Tuesday, a trader said.

JPMorgan, ING Bank, RBI, Sberbank, Unicredit and VTBC were the bookrunners for the Rule 144A and Regulation S notes, which were issued via Global Ports (Finance) plc.

Cyprus-based Global Ports operates the container terminal that serves Russian cargo flows.

Korea Resources tightens

The new notes from Korea Resources Corp. – $500 million 2¼% notes due 2021 that priced at 99.906 to yield 2.27%, or Treasuries plus 110 bps – attracted a final order book of $2.5 billion from 195 accounts, a market source said.

BofA Merrill Lynch, BNP Paribas, Citigroup and HSBC were the bookrunners for the Regulation S deal.

About 86% of the orders came from Asia and 14% from Europe, with 64% going to asset and fund managers, 19% to banks, 7% to insurers, 6% to private banks and 4% to central banks and sovereign wealth funds.

On Tuesday the notes were seen trading at 106 bps bid, 105 bps offered, a trader said.

Lat-Am moves higher

From Latin America, most bonds moved higher and tighter on Tuesday amid varying degrees of performance, a New York-based trader said.

“Credits like [Brazil’s Gerdau SA and Vale SA] are gapping higher again, with iron ore up 5% surely helping their cause,” he said.

Still, inquiry is light for Vale, he said.

“Chile high-grade is also grinding higher, depending on the credit, but there has been some institutional selling of some of the better, very low-beta credits the last two days,” he said. “[Mexico’s Cemex SAB de CV] is still mostly quiet but managing small gains. Even the weaker-performing 2026s have shown a nice pop today.”

Alternatifbank prints notes

In its new deal, Turkey’s Alternatifbank priced a $300 million issue of 8¾% notes due in 2026, a market source said.

The notes were initially talked at 10%, then revised to the area of 9% to 9¼%. After tightening further, to price at 9%, some market-watchers whispered that the bank had started its pricing too wide.

BofA Merrill Lynch, Citigroup and Commerzbank were the bookrunners for the Regulation S deal.

“There is no natural peer in the current tier 2 space,” a trader said.

BofA Merrill Lynch, Citigroup and Commerzbank were the bookrunners for the Regulation S deal.

“In a market friendly environment, we think that [Alternatifbank’s] 2026s to 2021s have room to tighten into the mid-8% range,” he said.

The new notes could be “illiquid,” he said, “due to the small size of the bank and the transaction.”

VimpelCom plans roadshow

In other news, Russia’s OJSC VimpelCom will set out on a roadshow for a possible issue of dollar-denominated notes, a market source said.

Other details were not immediately available on Tuesday.

VimpelCom is an Amsterdam-based telecommunications services provider. Its broadband services are offered in Russia, Ukraine, Kazakhstan, Uzbekistan, Tajikistan, Armenia, Georgia, Kyrgyzstan, Vietnam, Cambodia, Laos, Algeria, Bangladesh, Pakistan, Burundi, Zimbabwe, Central African Republic, Italy and Canada.

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