Shui On Land issues notes; Russia, Ukraine, Petrobras get attention; Mumtalakat on deck

By Christine Van Dusen

Atlanta, Nov. 17 – China’s Shui On Land Ltd. sold notes on Monday as many investors focused on Russia while bonds from Brazil continued to suffer as a result of the Petroleo Brasileiro SA (Petrobras) scandal.

On Friday, more than 20 people were arrested in association with a corruption investigation into Petrobras and some of its contractors. As a result, the oil company is delaying the release of its quarterly earnings report and may not share the numbers until the end of the year.

On Monday morning, trading was quiet but Petrobras’ bonds were about 15 basis points to 20 bps wider, a New York-based trader said.

Also from Brazil, notes from Odebrecht SA – which caught a bid late on Friday after being down 5 points on the day – moved lower on Monday, he said.

“It’s now off 7 points since Thursday’s close,” he said.

Bonds from other emerging markets – particularly in Central Europe, the Middle East and Asia – moved slightly wider on Monday morning, a London-based analyst said.

“But moves were fairly limited,” he said.

Meanwhile, the markets were reacting to word that the leaders at the Group of 20 meeting criticized President Vladimir Putin for his country’s involvement in the Ukraine conflict.

“Russian credit was under pressure again,” the analyst said. “Investors grow increasingly concerned by developments in Eastern Ukraine, as well as the drop in oil prices.”

In deal-related news, Bahrain Mumtalakat Holding Co. BSC set talk for an upcoming deal, Turkey’s Treasury mandated bookrunners and Kazakhstan’s KazStroyService Global BV postponed plans for an offering of notes.

Ukraine, Russia in focus

Ukraine rebels could be sanctioned but other punitive steps likely won’t be taken, the analyst said.

“There are reports that the European Union summit in early December could discuss further economic sanctions against Russia, however,” he said. “Clearly, developments in the next few weeks will be important, but our impression is that there is little appetite for another big increase in sanctions from the West.”

It’s expected that any new sanctions would target individuals or, less likely, companies.

“Russia still feeling defensive this morning, with credit default swaps 4 bps wider, reaching 300 bps again,” he said.

Petrobras in spotlight

Taking another look at Latin America, Brazil’s Petrobras remained in focus at the end of Monday’s trading session, the New York-based trader said.

Flows were mostly one-way until buyers emerged during the afternoon, he said.

Some of the company’s notes tightened in a bit by the close, leaving the 2024s wider by just few bps, though Petrobras’ shorter-duration bonds were wider by as much as 60 bps.

Paper from Brazil-based Vale SA traded in a 10-bps to 15-bps range and closed a few tighter on the day, he said.

Away from Brazil, bank bonds from Colombia were unchanged and held in well, even as other Latin American corporates suffered from contagion from Brazil, he said.

Jafza tightens

From the Middle East, the 7% 2019 dollar notes from Jebel Ali Free Zone (Jafza) were 11 bps tighter on the week, following the news that Dubai-based DP World was acquiring Economic Zones World, which houses the Jafza commercial and industrial park.

Perpetual bonds from the region were quiet and mostly unchanged, he said.

“Dar al Arkan Holdings’ has been popular lately,” he said. “Even the lagging 2015s were lifted today and the curve is 15 bps to 20 bps better on the week.”

Bonds from Kuwait remained solid, he said.

DIFC, Emirates NBD trade

In other trading from the Gulf region, the recent issue of 4 3/8% notes due 2024 that Dubai’s DIFC Investments LLC priced at par traded between par and 100.05 on Monday after trading last week in a similar range, a trader said.

The notes came to the market at mid-swaps plus 185 bps via Dubai Islamic Bank, Emirates NBD Capital, Noor Bank and Standard Chartered in a Regulation S sukuk deal.

“Active enough start before fading,” he said. “Some initial support on the recent DIFC.”

And Dubai-based Emirates NBD’s recent $1 billion of 3¼% notes due Nov. 19, 2019 that priced at 99.963 traded Monday at 100.11 bid, 100.21 bid, he said.

“Decent size,” he said.

BofA Merrill Lynch, BNP Paribas, Emirates NBD, HSBC and Standard Chartered Bank were the bookrunners for the Regulation S deal.

Shui On prices notes

China’s Shui On Land priced $500 million 8.7% notes due Nov. 24, 2017 at par to yield 8.7%, a market source said.

BofA Merrill Lynch, BNP Paribas, Credit Suisse, Deutsche Bank and Standard Chartered were the bookrunners for the Regulation S deal.

Shui On Land is a Shanghai-based real estate development company.

Mumtalakat sets talk

Bahrain Mumtalakat set talk in the mid-swaps plus 237.5 bps area for a dollar-denominated issue of benchmark-sized Islamic bonds due in seven years, a market source said.

BNP Paribas, Deutsche Bank, Mitsubishi UFG and Standard Chartered Bank are the bookrunners for the Regulation S deal.

The notes are expected to price on Tuesday.

“We expect the deal size to be up to $600 million,” a trader said. “Good spot to issue a new 2021. It will slot in nicely between the sovereign’s 2020 and 2022, which close bid side 190 and 203, respectively.”

Turkish Treasury picks banks

Turkey’s Treasury has mandated CIMB, Citigroup and HSBC as bookrunners for an issue of dollar-denominated Islamic bonds due in 10 years, a market source said.

No other details were immediately available on Monday.

In trading on Monday morning, the sovereign’s bonds widened a bit in response to United States Treasury moves, a trader said. But flows were limited.

Gruma sets size, tenor

Mexico’s Gruma SA de CV has set the size at $400 million and the tenor at 10 years for its upcoming issue of notes, a market source said.

Goldman Sachs and Santander are the bookrunners for the Rule 144A and Regulation S deal, which is being marketed on a roadshow until Nov. 19.

The proceeds from the new issue will be used to redeem the company’s perpetual bonds and to pay debt.

Gruma, based in Monterrey, Mexico, is involved in the production, marketing, distribution, and sale of corn flour, packaged tortillas, and wheat flour.

KSG postpones

Kazakhstan’s KazStroyService Global has postponed plans for an offering of dollar-denominated notes, due to market conditions, a market source said.

Deutsche Bank, Halyk Finance and JPMorgan were the joint global coordinators and joint bookrunners and VTB was a joint bookrunner for the Regulation S deal, which was marketed during a roadshow.

The engineering, procurement and construction company is based in Almaty, Kazakhstan.

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