New issues from Ras al Khaimah, China Properties, Korea Gas; investors remain 'timid'

By Christine Van Dusen

Atlanta, Oct. 8 - The Emirate of Ras al Khaimah, China Properties Group Ltd. and Korea Gas Corp. sold notes on Tuesday as markets came under pressure amid continued concern about the U.S. government's partial shutdown.

"In Central and emerging Europe, the Middle East and Asia, markets are timid and cautious before the 17th October debt deadline and this week's International Monetary Fund meetings," a London-based analyst said.

The Markit iTraxx SovX CEEME ex-EU index spread on Tuesday opened at 394 basis points over Treasuries, flat to Monday.

As the day went on, U.S. Treasuries softened somewhat, which allowed spreads to perform, a London-based trader said.

In trading, buyers were spotted for Abu Dhabi Commercial Bank's 2023s and Emirates airlines' 2023s and 2025s, he said.

"Pretty active again," he said. "There is clearly demand and appetite out there."

Bonds from Bahrain continued to see support, he said, with the sovereign about 20 bps tighter on the week. And Bahrain Telecommunications Co.'s 2020s were "still in the doldrums," he said.

"That's pushing the spread to the sovereign out to the high-70s now," he said.

Bonds from Kuwait remained popular.

"Interesting to see some private banking sellers of very short-dated paper," he said. "I think this makes sense for that account base, moving out to better opportunities in the five- to seven-year sector."

Also on Tuesday, several issuers took steps toward bringing new deals to the market, including Qatar's Al Khalij Commercial Bank, Brazil's Biosev SA, China Overseas Land & Investment Ltd. and Turkey's Albaraka Turk Katilim Bankasi AS.

Emirate prices notes

Ras al Khaimah priced a $500 million issue of 3.297% notes due in 2018 at par to yield 3.297%, or mid-swaps plus 175 bps, a market source said.

The notes were talked at a spread in the 200 bps area.

Al Hilal Bank, Citigroup, Mashreqbank, National Bank of Abu Dhabi and Standard Chartered Bank were the bookrunners for the Regulation S-registered deal.

New notes trade up

On Tuesday morning, prior to pricing, Ras al Khaimah's new notes were trading in the gray market up 25 cents on the bid side and up 45 cents on the offer side.

After the pricing, the notes were quoted between 100.75 and 100.85, a trader said.

"Obviously the 200 bps price talk drew a lot of investors in, and they were able to print at 175 bps over," he said. "The high print was 100.875. Very solid effort, all told, and a successful return to the capital markets."

China Properties sells bonds

China Properties priced a $150 million issue of 13½% five-year notes at 99.117 to yield 13¾% via BofA Merrill Lynch in a Regulation S deal.

The proceeds will be used for refinancing, project construction, capital expenditures and general corporate purposes.

China Properties is a Hong Kong-based real estate developer focusing on large-scale residential and commercial project in China's major cities.

Korea Gas does deal

Korea Gas priced a €500 million issue of 2 3/8% notes due April 15, 2019 at 99.702, a market source said.

Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, Goldman Sachs and UBS were the bookrunners for the Regulation S deal.

As of Tuesday morning the books were in excess of €2 billion.

Al Khalij gives guidance

Qatar's Al Khalij Commercial Bank set talk in the mid-swaps plus 195 bps area for its five-year offering of dollar-denominated and benchmark-sized notes (expected rating: //A-), a market source said.

BNP Paribas, HSBC, QNB Capital and Standard Chartered Bank are the bookrunners for the Regulation S deal.

The notes are expected to price sometime this week.

"As long as the size and pricing are fair I think this one can perform OK," a trader said. "Mid-swaps plus 195 bps area for a five-year is purely to lure investors in. I suspect this one prices through that. Qatari bank paper is typically well supported."

Biosev sets talk

Brazil-based sugar cane company Biosev set talk in the high-11% to 12% area for its upcoming $300 million offering of seven-year notes, a market source said.

BNP Paribas, Bradesco BBI and Citigroup are the active bookrunners for the Rule 144A and Regulation S deal. BB Securities, HSBC and Itau SSA are the passive bookrunners.

The proceeds will be used to repay existing borrowings and financings.

The notes are expected to price this week.

Biosev is the sugar cane unit of commodities giant Louis Dreyfus Holding BV.

China Overseas bookrunners

China Overseas Land & Investment has mandated BOC International, BNP Paribas, Citigroup, CLSA, HSBC and JPMorgan to arrange a roadshow starting Wednesday, a market source said.

An offering of notes may follow.

China Overseas is a Hong Kong-based construction and development company.

Albaraka Turk plots sukuk

Turkey-based banking group Albaraka Turk is looking to price a $500 million issue of Islamic bonds, a market source said.

The proceeds will be used to fund expansion.

The notes are expected to price during the second quarter of 2014.

OGX rebounds

Notes from Brazilian oil producer OGX Petroleo & Gas Participacoes SA put on a couple of points during Tuesday's session, following Monday's lows, a trader said.

OGX's 8½% notes due 2018, seen at about 6 on Monday, moved closer to 8½ on Tuesday. The 8 3/8% notes moved to 7½%, he said.

The Brazilian oil producer missed a $44.5 million coupon on its 2022 paper last week and has said it will not use the grace period to pay the interest. On the heels of that news came a report that that company's only viable field, Tubarao Martelo, may contain up to 108.5 million barrels of crude - far less than the 285 million barrels the company had predicted last year.

The company has also sold off other assets in order to shore up its cash this past year. As such, investors fear that there are not enough assets to cover the $3.6 billion in bonds in the event of a bankruptcy.

Al Hilal fairly active

The recent notes from Abu Dhabi-based Al Hilal Bank - $500 million of 3.267% notes due 2018 that priced at par - opened Tuesday at 100.95 bid, 101.20 offered after trading between 101.1 and 101.2 on Monday, a trader said.

HSBC, Standard Chartered Bank, Citigroup and National Bank of Abu Dhabi were the bookrunners for the Regulation S offering of Islamic bonds.

Sabic gets attention

Saudi Arabia-based Saudi Basic Industries Corp.'s (Sabic) $1 billion 2 5/8% five-year notes that priced at 99.449 opened Tuesday at 99.03 bid, 99.33 offered.

The notes came to the market at a spread of Treasuries plus 130 bps via Citigroup, HSBC Securities, Mizuho Securities and RBS Securities Inc. in a Regulation S deal.

On Monday the notes traded at 99.2 bid, 99.4 offered.

"Sabic has widened, yes, but there were a few too many bonds in loose hands," a trader said. "And the $1 billion was priced fairly aggressively."

Perpetuals trade

The perpetual notes that Abu Dhabi Islamic Bank priced at par opened on Tuesday at 99.5 bid, 100.25 offered, a trader said.

Later in the morning, the notes were seen at 99.62 bid, 100.37 offered.

Dubai Islamic Bank's perpetuals, which also priced at par, started the session on Tuesday at 95.75 bid, 96.50 offered.

The notes moved to 95.87 bid, 96.62 offered later on Tuesday morning.

Naftogaz concerns remain

Ukraine-based Naftogaz remained in the news early in the week as questions lingered about the company's plans to pay its coupon, said Svitlana Rusakova of Dragon Capital.

Bondholders still had not received their money by the end of Monday, she said.

But this had little impact on Naftogaz's bonds, with most unchanged.

"Investors were still attributing the delay to some technical difficulties and expected the payment to be made soon," she said.

Issuance from ZES

On Monday, Slovakia's Zapadoslovenska energetika AS (ZSE) priced a two-tranche issue of €315 million five-year notes and €315 million 10-year notes (expected rating: /BBB+/), a market source said.

The issuer sold €315 million five-year notes at par to yield 2 7/8%, or mid-swaps plus 160 bps. The notes were talked at a spread of mid-swaps plus 160 bps to 165 bps.

The issuer also sold €315 million 4% 10-year notes at 99.814 to yield 4.023%, or mid-swaps plus 190 bps.

The notes were talked at a spread of mid-swaps plus 190 bps to 195 bps.

Citigroup and Societe Generale were the bookrunners for the Regulation S-only deal.

The issuer is a Bratislava, Slovakia-based electricity utility company.

Stephanie N. Rotondo contributed to this report

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