Petroperu sells $2 billion in two tranches; Tinkoff Bank dollar notes gain; VimpelCom eyed

By Rebecca Melvin and Colin Hanner

New York, June 12 – Petroleos del Peru SA priced $2 billion of notes late Monday following a roadshow last week in which investor response was strong, market sources said.

“The books have gone pretty well,” a New York-based market source said ahead of pricing of the notes (BBB-/BBB+) being marketed by bookrunners BofA Merrill Lynch, Goldman Sachs, HSBC and JPMorgan.

The Petroperu 4¾% notes due 2032 for $1 billion and the Petroperu 5 5/8% notes due 2047 for $1 billion both priced at par.

As details were being hammered out, a warning was released by Peru’s Comptroller, which noted profit risk associated with the investment plan for Petroperu’s Talara oil refinery – for which proceeds of the notes are being earmarked – because it isn’t known how much the modernization plans will ultimately cost.

Also in focus was expected pricing of Minerva SA’s $300 million notes reopening. The notes will be used to finance asset purchases the Brazilian food processor’s subsidiaries have acquired in Uruguay, Paraguay and Argentina from JBS.

Fitch said it expects to assign a BB- rating to the proposed reopening of the 2026 notes issued in September 2016 by Minerva Luxembourg SA.

Meanwhile, the Republic of Uruguay was offering new bonds as part of a local, one-day exchange offer for five series of dual-currency denominated notes.

Elsewhere in emerging markets, Moscow-based Tinkoff Bank’s $300 million 9¼% loan participation notes traded up after issue, quoted at 101.75 on Monday with a price of 9.893%, compared with their 9¼% launch price, a London-based market source said.

The Tier 1 deal was relatively small from a small financing entity, the source said. “It was a positive move within limited trading.”

More than 30% of the issue was allocated to accounts in Russia, and the unofficial tally of Russia accounts was likely to have been higher in the 40% to 50% range, taking into account other European allocations affiliated with Russia, the source said.

In addition, initial price talk and final terms were expected to be set on the VimpelCom Holdings BV offering of dollar-denominated senior unsecured notes on Tuesday, a syndicate source said.

Proceeds of the new VimpelCom notes (Ba2) will be used to finance the purchase of notes in a tender offer launched on May 30, as well as for general corporate purposes.

The deal is tied to VimpelCom’s tendering for $499,149,000 of outstanding 9 1/8% loan participation notes due 2018, $650.57 million of 7.748% loan participation notes due 2021 and $1.28 billion of 7.5043% guaranteed notes due 2022.

VimpelCom, a subsidiary of VEON Ltd., is a telecommunications and digital services provider based in Amsterdam.

Turkey GDP data eyed

In Turkey, a better-than-expected GDP figure in the first quarter, which was positive by 5% year over year compared to an estimated 3.5% rate, gave the lira and Turkish credit a boost on Monday. The sovereign’s credit default swaps were about 5 basis points tighter at 190 bps.

The strong Turkish GDP was mainly driven by public sector consumption spending, which was positive by 9.4% compared to 0.8% in the fourth quarter of 2016. Exports were up 10.6%, compared to 2.3% in the fourth quarter, and household consumption remained solid although weaker year over year at 5.1%, compared to 5.7% in 2016, according to a market source.

Financial markets now shift focus to the Central Bank of the Republic of Turkey, which is expected to maintain its benchmark rates unchanged in a Thursday policy meeting. The one-week repo rate is 8%; the overnight lending and borrowing rates are 9¼% and 7¼%, respectively, the market source said.

The latest showing in economic figures will ease the political pressure to reduce rates, the source said.

Qatar in focus

Qatar, the Middle Eastern country at the crux of a regional diplomatic issue that has resulted in the rapid downgrading of sovereign bonds, was generally higher on Monday, a day following comments by the state’s finance minister, Ali Shareef Al Emadi.

Qatar’s 3¼% notes due 2026 were up 3/8 point to 98.37 bid, 98.87 offered, while the 9¾% notes due 2030 followed with a ¼-point gain to 159 bid, 160 offered.

In an interview with CNBC, Al Emadi propped up the country’s situation and issued a warning for other Middle Eastern countries who cut ties with Qatar because of apparent terrorist links.

“A lot of people think we're the only ones to lose in this ... if we're going to lose a dollar, they will lose a dollar also,” Al Emadi said.

“We are extremely comfortable with our positions, our investments and liquidity in our systems.”

Elsewhere in geopolitics, completed elections in two European countries will garner chatter for the week ahead, a market source said, and monetary policy news in the United States could have broader implications for emerging markets.

“It will remain a busy week after the U.K. general and French legislative elections,” a market source said, adding that the U.S. Federal Reserve’s expected interest rate hike on Wednesday will most likely not bring tremendous volatility, though comments after the hike may offer a peek into the economy going forward.

In the secondary sphere, Republic of Cote D’Ivoire’s two benchmark issues that priced last week – a $1.25 billion issue of 6 1/8% amortizing notes due 2033 that priced at 98.747 to yield 6¼% and €625 million of eight-year notes, which priced at par to yield 5 1/8% – were mixed during morning trading.

The 6 1/8% notes were quoted with a 98.18 bid, 98.53 offered, lower from its post-pricing movement on Friday.

And the 5 1/8% notes were quoted at 101.56 bid, 102.56 offered, up from its par pricing on Friday.

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