Brazil’s BRF issues bonds; Ematum may restructure debt; Chinese bonds see ‘turbulent’ day

By Christine Van Dusen

Atlanta, May 29 – Brazil’s BRF SA sold notes on Friday as perpetual bonds from the Middle East caught a bid, Mozambique’s Ematum was in the news and Latin American notes widened.

“Greece is still a potential event risk,” a trader said. “Time and time again we think the market is positioned well ahead of these signposted events but they never are.”

Investment-grade names from the Gulf region lagged, a London-based trader said.

“Even the laggards are 5 basis points to 15 bps wider, though, which is hardly a severe move,” he said. “Technicals in the market remain super-strong. The Street is chasing the same bonds, dealers get lifted in the same paper and get hit in the same paper, which creates a tricky sea for the humble flow trader to navigate.”

Money has flowed into bonds from Kuwait’s corporates, he said, including Kipco.

“I’m a little fearful of Ramadan and summer just around the corner – it’s June next week, and liquidity will surely only get worse over the coming weeks. Supply has ticked along this year but nowhere near enough versus redemptions and local cash liquidity.”

Most of the supply from the Middle East so far this year has been from banks, he said, with only a few issues from other sectors.

“In saying that, we have definitely seen global adding of senior bank paper out to 5 years from the major names over the course of the month,” he said.

Also on Friday, market sources were whispering about a possible issue of dollar bonds from Mongolia and an international bond issue from China’s Anhui Transportation Holding Group Co. Ltd.

Ematum could restructure debt

Mozambique’s Ematum was on radar screens on Friday, on the news that the state-owned tuna-fishing company will likely restructure about $850 million of debt.

In response, the company’s 6.035% notes due 2020, which priced at 92.051 to yield 8½%, opened “wide and defensive,” a trader said.

The notes were seen at 95 bid, 96½ offered, he said.

‘Turbulent’ day for Asia

From Asia, much of the trading action on a “turbulent” day focused on investment-grade bonds from China, a London-based trader said.

The market opened unchanged, then sold off, then recovered to finish the Asian session unchanged to a few basis points wider, he said.

“China oils closed unchanged to 2 bps wider, with Cnooc Ltd.’s 2025s trading to wides of 153 bps and last up at 148 bps into the close,” he said.

The new issue of 3 7/8% notes due 2025 that Singapore-based Global Logistic Properties Ltd. priced on Thursday at 99.222 to yield Treasuries plus 185 bps traded on Thursday morning in the 188 bps range.

“Mostly flippers, closed at 187 bps bid, 184 bps offered,” another trader said.

China’s Bluestar notes dip

China National Bluestar Group Co. Ltd.’s new $1 billion issue of senior notes due in 2018 and 2020 that priced on Thursday also saw some activity on Thursday.

The 2018s that priced at a spread of Treasuries plus 220 bps moved to 260 bps before closing at 260 bps bid, 257 bps offered.

The 2020s that priced at a spread of Treasuries plus 235 bps traded to a wide of 240 bps before rebounding to 236 bps and closing at 237 bps bid, 234 bps offered.

“Had good retail demand after bonds dipped below reoffer,” a trader said.

New Asian issues in demand

Most of the recent new issues from Asia have seen solid demand, another trader said.

“Enough demand to see books oversubscribed, but no real desire to add risk,” he said. “On the most part they are a touch wider or wrapped around reoffer. [U.S. Treasuries] are quietly firm but there is a real lack of activity in our market, so we leak wider.”

Lat-Am in focus

Trading of corporate bonds from Latin America was weaker at the open on Friday, a New York-based trader said, as clients became better sellers.

Still, high-grade credits from Brazilian and Mexican corporates were better offered, he said, and Brazil-based Odebrecht SA’s curve continued to perform.

“But that curve trades very credit-specific right now, given its still-strong rating but higher-beta since the scandal began,” he said of Odebrecht.

Brazil underperforms

Among sovereign credits from Latin America, spreads widened on the day for low-beta names, with Brazil underperforming, the New York trader said.

Five-year credit default swaps spreads closed at the wide end of the recent range, he said.

But Argentina’s local bonds remained firm, and Venezuela and PDVSA performed well.

“A volatile week, which saw prices hit recent lows yesterday but rally 1½ points to 2 points today, coinciding with a big rebound in oil,” he said. “Heavy two-way flow today, especially in the afternoon, as month-end volumes emerged in full swing.”

BRF sells bonds

In its new deal, Brazil’s BRF priced €500 million 2¾% notes due June 3, 2022 at 99.548 to yield 2.822%, or mid-swaps plus 225 bps, a market source said.

The notes were talked at a spread in the 240 bps area.

BNP Paribas, BofA Merrill Lynch, Citigroup, Deutsche Bank, Morgan Stanley and Santander GBM were the bookrunners for the Rule 144A and Regulation S deal.

BRF is a food company based in Itajai, Brazil.

Peking University draws orders

China’s Peking University Founder Group Co. Ltd. – via Dawn Victor Ltd. – priced $500 million 5½% notes due June 5, 2018 at par to yield 5½% and attracted more than $2 billion in orders, a market source said.

The pricing matched talk.

DBS was the bookrunner for the Regulation S notes.

The proceeds will be used for working capital and general corporate purposes.

The issuer is a Beijing-based technology conglomerate.

© 2015 Prospect News.
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