Russian issuers, China Datang, OAS sell notes; EM bonds 'quiet but firm'; spreads wider

By Christine Van Dusen

Atlanta, April 18 - Thursday saw new issues from two Russian issuers - OJSC Alfa Bank and JSC Gazprom Neft - alongside China Datang Corp. Renewable Power Co. Ltd. and Brazil's OAS SA as trading volumes declined, spreads widened and post-election violence continued in Venezuela.

Numerous other issuers took steps toward pricing deals, including Turkey's Koc Holding AS, Philippines' San Miguel Corp., Russia's Alliance Oil Co. Ltd., Kazakhstan's KazMunaiGaz National Co., China's Citic Securities Co. Ltd., Wind Acquisition Finance SA, Slovenia, Bulgarian Energy Holding EAD and Russia's OJSC Magnitogorsk Iron and Steel Works (MMK).

"Central and Eastern Europe are taking a backseat today with light flows," a London-based analyst said. "And it's a quiet but firm start in the Middle East and North Africa."

The Markit iTraxx SovX CEEME ex-EU index on Thursday moved 3 basis points wider to Treasuries plus 196 bps. The corporate index also widened, moving out 7 bps to Treasuries plus 232 bps.

"Below-average volumes today as it felt like majority of market this morning was focusing on Lukoil's return to the markets," a London-based trader said.

He was referring to the oil and gas company's two-tranche issue of $3 billion notes due in 2018 and 2023 with bookrunners BNP Paribas and Citigroup.

The deal included $1.5 billion notes due 2018 that priced to yield mid-swaps plus 270 bps, matching price talk.

The second tranche, $1.5 billion notes due 2023, priced to yield mid-swaps plus 285 bps, also matching talk.

"After trading down in both tranches, the deals are now seeing better demand are trading above re-offer," another trader said.

Bank paper remains popular

There were other small pockets of activity, the London-based trader said.

"Bank paper has been very popular of late, especially Abu Dhabi Islamic Bank, National Bank of Abu Dhabi and Qatar National Bank," he said. "NBAD's 2019s have managed to say with Treasuries, closing unchanged on the week, or 8 bps tighter on the month now."

Busy session for perpetuals

Perpetual notes were again active, a trader said, with ADIB's closing at 106½ and Dubai Islamic Bank's at 102.05.

"Some demand for Sabic Capital paper today, but the bonds are very well placed and tricky to source," he said. "Good squeeze on Emirates Islamic Bank's 2017s and 2018s. These guys should look to issue here, given the lack of paper around and where bonds are trading."

And sovereign bonds from Dubai saw buyers, particularly for the 2023 notes at a touch under par, he said.

"It trades rich, but it's a government fixed-rate sukuk and it's fairly well placed now," he said. "Also some two-way on the 2043s from retail investors."

Polyus could be 'interesting'

One trader on Thursday was watching out for the upcoming issue of notes from London-based Polyus Gold International Ltd., a gold producer with mines in Russia and Kazakhstan.

The company has set the size at $750 million for its upcoming issue of notes.

"The deal will look interesting given the strong fundamentals of the credit, depending on pricing and the size of the deal," she said.

She was also keeping an eye out for Russia-based potash producer Uralkali's upcoming dollar-denominated notes, the proceeds of which will be used for refinancing and general corporate purposes.

"There is substantial senior secured debt on the balance sheet, which if further increased could pose some pressure on its bond ratings given the potential for further subordination of the instruments," she said.

OAS, Alfa Bank sell notes

In its new deal, Brazil-based infrastructure company OAS priced a $500 million issue of 8 7/8% perpetual notes at par to yield 8 7/8%, tighter than talk, a market source said.

BB Securities, Bradesco BBI, BTG Pactual, Deutsche Bank, HSBC, Itau BBA and Santander were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used for capital expenditures.

And Russia-based Alfa Bank printed a RUB 10 billion issue of 8 5/8% notes due April 26, 2016 at par to yield 8 5/8% via Citigroup, HSBC and Alfa Bank.

China Datang prints bonds

Thursday hosted another new deal - power generation company China Datang sold RMB 2.5 billion 3.6% notes due April 25, 2016 at par to yield 3.6% with CICC, Goldman Sachs, HSBC and ICBC.

And Russian oil producer Gazprom Neft priced €750 million 2.933% notes due April 26, 2018 at par to yield 2.933, or mid-swaps plus 215 bps, tighter than talk.

BNP Paribas, Credit Agricole, Gazprombank and JPMorgan were the bookrunners for the Regulation S-only deal.

Koc, San Miguel give guidance

In deal-related news, Turkey-based industrial conglomerate Koc Holding set initial price guidance for its upcoming issue of seven-year dollar notes at the Treasuries plus 262.5 bps area, a market source said.

BofA Merrill Lynch, BNP Paribas, Citigroup and Deutsche Bank are the bookrunners for the deal.

And Philippines-based beer producer San Miguel set price talk at 5 1/8% for its upcoming issue of up to $2 billion of notes due 2023.

ANZ, Standard Chartered Bank, BofA Merrill Lynch, DBS Bank, Deutsche Bank and Standard Chartered Bank are the bookrunners for the Regulation S deal.

Alliance sets size

Russia's Alliance Oil set the size at benchmark for its upcoming issue of dollar notes, which are likely to carry a tenor of seven years.

Deutsche Bank, Gazprombank, Goldman Sachs and Raiffeisen Bank International are the bookrunners for the Rule 144A and Regulation S transaction.

"This deal follows the group's announced fiscal year 2012 results and call, which clearly indicated that the group will need to refinance," the London analyst said. "The proceeds of the bond are intended for repaying secured debt, and depending on the issue size, reduce exposure on their VEB project finance loan used for funding their capital expenditures."

The company's credit metrics are likely to remain under pressure due to higher capital requirements, she said.

KazMunaiGaz looks at 30 years

Kazakhstan's KazMunaiGaz could set the tenor at 30 years for its upcoming issue of dollar-denominated notes, a market source said.

BofA Merrill Lynch, Barclays, Halyk Finance and Visor Capital are the bookrunners for the Rule 144A and Regulation S deal.

"The proceeds of the deal are intended at refinancing its short-term debt," the analyst said. "Given the quasi-sovereign nature of the credit and its relative strong performance versus other quasi-sovereign majors, it is likely to be well received by investors, depending on pricing."

Citic plans deal

China-based investment bank Citic Securities is planning an issue of notes, according to a company filing.

The proceeds from the Regulation S deal will be used for business and operational needs.

And Bulgarian Energy is planning to issue €250 million of notes this fall, a market source said.

Slovenia, MMK in focus

Slovenia will set out on April 22 for a roadshow to market its upcoming issue of up to $4 billion of dollar- and euro-denominated notes, a market source said.

The proceeds will be used to repay maturing debt, for budget financing and for the recapitalization of the country's banking sector.

And Russian steel producer MMK is considering an issue of eurobonds, a market source said.

The company has reportedly hired banks for the deal, but no further details on the mandate were immediately available on Thursday.

Wind Acquisition euro notes

Wind Acquisition Finance - part of Russia-based Vimpelcom (VIP) subsidiary Wind Telecomunicazioni SPA - is planning a €500 million equivalent two-part issue of notes, market sources said.

BNP Paribas, Banca IMI, Societe Generale, UBS and UniCredit are the bookrunners for the deal, the proceeds of which will be used to repay bank debt.

"The group is doing an opportunistic refinancing move, given the current spread levels in the market and the mounting pressure from maturing and amortizing debt in its structure," the London-based analyst said. "Although in itself this is a good move to optimize capital structure, alleviate refinancing pressure and extend the debt maturity profile, it left the market wondering what happened to the centralized funding strategy of its parent VIP."

Russia's Vimpelcom has discussed pulling the funding of the group into one internal bank in order to optimize credit costs, she said.

"The new issue is in a sharp divergence from this strategy and is likely to cause some confusion on the side of EM investors," she said. "Our take is that given the call options in the proposed bonds, VIP kept its flexibility to take these instruments out if and when it decides to address the maturity profile of its subsidiary."

Paul A. Harris contributed to this article.

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