U.S. government shutdown looms, widening spreads; Barbados, Ras al Khaimah, line up issues

By Christine Van Dusen

Atlanta, Sept. 30 - Emerging markets issuers lined up new deals, spreads widened and investors kept a close eye on the United States on Monday as the country's government looked poised to temporarily shut down.

The Markit iTraxx SovX CEEME ex-EU index spread on Monday opened at Treasuries plus 257 basis points, wider by 10 bps from Friday. The Markit iTraxx Crossover index spread - seen Friday at 398 bps - widened to 411 bps on Monday.

"The shutdown of the U.S. government seems ever more likely," a London-based analyst said. "The euro region has troubles of its own, with the Italian coalition on the verge of breaking up."

All of this contributed to a softer morning for most of Central and emerging Europe, the Middle East and Asia.

"The market is in risk-off mode," the analyst said.

Still, most prices and spreads in EM didn't move wildly on Monday, a London-based trader said.

"Of course there are some outliers depending on client flows and Street positioning, but generally the market is holding in OK," he said.

He was keeping his eye on the recent issue of $1 billion 2 5/8% notes from Saudi Arabia's Saudi Basic Industries Corp. (Sabic).

The notes priced to yield Treasuries plus 130 bps via Citigroup, HSBC Securities, Mizuho Securities and RBS Securities Inc. in a Regulation S deal.

The final book was $5.2 billion from 280 accounts, he said.

"It closed today at Treasuries plus 140 bps on the bid side and only sellers were seen," he said. "So it pays to stick to one's targets of fair value and not get sucked into some of these deals going forward, if they come too tight."

Meanwhile, several issuers advanced new deals, including the Government of Barbados, the Emirate of Ras al Khaimah, Abu Dhabi-based Al Hilal Bank, Philippines-based Manila Electric Co. (Meralco), OJSC Russian Agricultural Bank, Slovakia's Zapadoslovenska energetika AS (ZSE), Brazil's Biosev SA and Export-Import Bank of Malaysia Berhad (Mexim).

"Syndicate desks seem to want to again price as tight as they can get away with, leaving the secondary somewhat exposed," the London trader said.

Middle East in focus

In trading on Monday, demand was noted for bonds from Dubai Electricity and Water Authority, a trader said.

"No one does it but selling the 2015s and 2016s to move into the 2018s and 2020s makes a lot of sense," he said.

And two-way activity was spotted for Qtel International, which saw its 2028s underperform as compared to its 2043s.

"Saw some interest in Abu Dhabi Commercial Bank," he said. "There remain pockets of value out there, but they're getting harder to spot."

Barbados gives guidance

Barbados gave initial price guidance in the 8¾% area for its upcoming $500 million-maximum issue of amortizing notes due in October 2025, a market source said.

Deutsche Bank and CIBC are the bookrunners for the deal, which could price as soon as Tuesday.

Proceeds will be used to finance a tender offer, to provide budgetary support to finance fiscal operations, to build foreign exchange reserves and to improve the government's external debt maturity.

Emirate plans roadshow

The Emirate of Ras al Khaimah will embark on a roadshow starting Wednesday for a dollar-denominated issue of Islamic bonds, a market source said.

Al Hilal Bank, Citigroup, Mashreqbank, National Bank of Abu Dhabi and Standard Chartered Bank are arranging the Regulation S-registered marketing trip.

The roadshow will be held in Asia, the Middle East and Europe.

Al Hilal sets talk

Abu Dhabi-based Al Hilal Bank gave initial guidance in the mid-swaps plus 190 bps area for its upcoming issue of dollar-denominated notes due in five years, a market source said.

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

The notes are expected to price on Tuesday.

"This looks OK to me, subject to a $500 million issue, as it does tick plenty of boxes," a trader said.

Meralco seeks to issue notes

Philippines-based electric utility Meralco is looking to issue between $250 million and $300 million of bonds, according to a company announcement.

Proceeds will be used to raise funds for capital expenditures.

The electrical power distributor also announced separate plans to issue up to PHP 15 billion of seven-year and 12-year corporate bonds with an up to PHP 5 billion over-allotment option via BPI Capital Corp. and First Metro Investment Corp.

Proceeds from the peso-denominated bonds will be used to refinance existing debt.

Roadshow for Russian bank, ZSE

Russian Agricultural Bank will set out on a roadshow on Wednesday for a dollar-denominated issue of notes, a market source said.

BNP Paribas, Credit Agricole, Goldman Sachs and JPMorgan are the bookrunners for the Rule 144A and Regulation S transaction.

And Slovakian utility ZSE has mandated Citigroup and Societe Generale as bookrunners for a euro-denominated issue of notes that will be marketed during a Regulation S roadshow starting Wednesday.

Biosev taps bookrunners

Brazil's Biosev has mandated BB Securities, BNP Paribas, Bradesco BBI, Citigroup, HSBC and Itau BBA to arrange a roadshow for a dollar-denominated issue of notes, a market source said.

BNP Paribas, Bradesco BBI and Citigroup are the active bookrunners for the Rule 144A and Regulation S deal.

The roadshow begins Tuesday in Santiago and will travel to London, the West Coast of the United States, Zurich, Geneva and Boston before concluding on Oct. 7 in New York.

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

Mexim plots roadtrip

Export-Import Bank of Malaysia Berhad (Mexim) has mandated BNP Paribas, CIMB, HSBC and Maybank to lead a roadshow starting Wednesday for a dollar-denominated issue of Islamic bonds, a market source said.

The roadshow will take place in Asia, Europe and the Middle East.

Yuzhou prices notes

China's Yuzhou Properties Co. Ltd. priced $300 million 8¾% notes due 2018 at par to yield 8¾%, according to a company filing.

The bookrunners for the Regulation S deal were BOCI Asia Ltd., DBS Bank Ltd., Deutsche Bank AG, Singapore Branch, Hongkong and Shanghai Banking Corp. Ltd., J.P. Morgan Securities plc and UBS AG, Hong Kong Branch.

The company will use the proceeds of the Regulation S deal to refinance its existing debt and for general corporate purposes.

Korea Electric does deal

Korea Electric Power Corp.'s new CHF 200 million 1½% notes due 2019 drew 37% of its orders from banks and private banks, 27% from insurers, 24% from asset managers, 10% from pension funds and 2% from central banks, a market source said.

The notes priced at 100.154 with bookrunners UBS and Credit Suisse.

Private banks pick up bonds

The recent notes from South Africa's African Bank Ltd. - CHF 105 million 5½% notes due 2017 that priced at par - attracted 93% of its orders from private banks and retail and 7% from asset managers, a market sources said.

Credit Suisse and UBS were the bookrunners for the deal.

The bank recently issued ZAR 510 million of series ABL 18 unsecured floating-rate bonds due 2015. The bonds bear interest at three-month Jibar plus 285 bps. Interest is payable quarterly.

The bank also issued ZAR 490 million of series ABL 19 unsecured floating-rate bonds due 2018. The bond bears interest at three-month Jibar plus 400 bps. Interest is payable quarterly.

BRE Bank attracts orders

Poland's BRE Bank SA sold CHF 200 million 2½% notes due 2018 at 99.896 to yield 2.528%, or mid-swaps plus 180 bps, a market source said.

Credit Suisse, Commerzbank and UBS were the bookrunners for the Rule 144A and Regulation S deal.

The notes attracted 80 accounts, with 90% from Switzerland and 10% from Germany and Lichtenstein.

Private banks and retail picked up 57%, asset managers 24%, insurers 12%, pension funds 5% and central banks 2%.

Chilean bottler's final book

The final book for the recent issue of $575 million 5% notes due 2023 from Chile's Embotelladora Andina SA was $2.6 billion, a market source said.

The notes priced at 99.805 to yield Treasuries plus 237.5 bps via JPMorgan, Itau BBA and Santander in a Rule 144A and Regulation S deal.

The issuer is a Santiago-based bottler of soft drinks.

Orders come in for Caixa

About $5.6 billion in orders came in for the new issue of $1.25 billion 4½% notes due 2018 from Brazil's Caixa Economica Federal, a market source said.

The notes priced at 99.333 to yield Treasuries plus 325 bps in a Rule 144A and Regulation S transaction via Deutsche Bank Securities, Bradesco, Banco do Brasil, BofA Merrill Lynch, BTG Pactual and HSBC Securities.

About 72% of the orders came from the United States, 27% from Europe and 1% from Asia.

Funds accounted for 78%, banks 12%, hedge funds 5% and pension funds and insurers 5%.

Lippo Malls sees small book

Somewhat oversubscribed was Singapore-based Lippo Malls Indonesia Retail Trust's recent S$150 million of 4¼% notes due 2016 that priced at par to yield 4¼%, a market source said.

The deal drew S$200 million from 35 accounts, with 98% from Singapore and 2% from others.

Private banks accounted for 69%, asset managers 26% and corporates and insurers 5%.

Standard Chartered Bank was the arranger for the Regulation S deal.

Guangdong Nuclear popular

The final book for China Guangdong Nuclear Power Group's recent $600 million issue of 3½% notes due 2018 was more than $2.5 billion from more than 150 accounts, a market source said.

About 84% of the orders came from Asia, 13% from Europe and 3% from the offshore United States.

The notes priced at 99.352 to yield 3.643%, or Treasuries plus 220 bps.

Fund managers picked up 48%, banks 35%, insurers 9%, the public sector 5% and private banks 3%.

HSBC, JPMorgan, ABC International, Bank of China, China Construction Bank, Deutsche Bank, ICBC and Standard Chartered Bank were the bookrunners for the Regulation S deal.

OGX to miss coupon

In other news, The Wall Street Journal reported that Brazil's OGX Petroleo e Gas Participacoes SA was planning to skip a $44.5 million interest payment on Tuesday. The article also claimed that a bankruptcy filing was likely by the end of October.

OGX's 8½% notes due 2018 were trading off over 2 points, a trader said Monday.

He pegged the issue around 15.

Another trader called the bonds "a little lower," seeing them in a 15 to 16 context.

The dip came as The Journal reported that the Brazilian oil company majority-owned by Eike Batista was planning to skip a $44.5 million coupon payment on its 2022 paper.

The company also has a coupon on the 2018 maturity in December.

According to The Journal article, the company is working on a bankruptcy filing, which is expected to come by the end of the 30-day grace period.

Additionally, Brazlian newspaper Valor reported that OGX was thinking about selling its Tubarao Martelo oil field to Malaysia's Petroliam Nasional Bhd. after it files for Chapter 11 protections. In May, Petronas had agreed to pay $850 million for a 40% stake in the field, but negotiations faltered as Petronas said OGX needed to deal with its restructuring effort first.

Stephanie N. Rotondo contributed to this article.

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