Latin American credit outperforms; India’s Oil and Natural Gas launches $1 billion notes

By Paul A. Harris

Portland, Ore., July 19 – Latin America credit outperformed the rest of emerging markets credit on Tuesday, as Turkey continued to create a drag on market sentiment, a source said.

Brazil’s five-year credit default swaps tightened by a single basis point to 289 bps bid, from 290 bps bid.

Mexico’s five-year CDS ended the New York day unchanged at 142 bps bid.

The price of the index, with a 14% Turkey weighting, was a dime lower at 93.10, down from 93.20.

Latin America high yield finished firmer on the session.

Venezuela’s state-owned Petroleos de Venezuela, SA’s (PDVSA) notes due in 2017 finished at 78 bid, up from 750 bid.

Venezuela sovereign bonds due 2027 were also higher at 51 bid, up from 49.50 bid.

Flows were dominated by ETF buyers across the curve, as well as real money demand for longer maturities.

In the London afternoon Turkey continued to put a drag on the market, with Turkish bank paper taking a pretty good hit, sources said.

Turkey’s Yapi Kredi cancelled its $550 million issue of 4½% notes due July 19, 2023 on Tuesday, the day the notes were to settle, due to the turmoil in Turkish credit.

Yet the Turkish turmoil was relatively contained, according to a trader who said that the secondary market was strong during the London session.

Oil prices are driving the Middle Eastern credit, the source said.

Investors facing an ultra-low rate environment in North America and Europe are seeing value in the Middle East, particularly since that sector is largely bereft of the complications resulting from central bank stimulus and easing, the source said.

Oil and Natural Gas notes

Oil and Natural Gas Corp. Ltd. launched a $1 billion two-part offering of notes (Baa2/BBB-) today, according to a market source.

The deal includes $400 million of 5.5-year notes launched at Treasuries plus 175 bps, versus initial guidance of 195 bps.

A $600 million tranche of 10-year notes launched at Treasuries plus 220 bps, versus initial guidance of 235 bps.

Orders came to $1.2 billion across both tranches at the New York open, a source said.

Citigroup and Standard Chartered Bank are joint global coordinators and joint bookrunners. DBS Bank Ltd., Mizuho Securities, MUFG and SMBC Nikko are also joint bookrunners.

Standard Chartered will bill and deliver.

The issuing entity will be indirect wholly owned subsidiary ONGC Videsh Vankorneft Pte. Ltd.

The notes come with a change of control triggered if the government of India ceases to own, directly or indirectly, more than 50% of either Oil and Natural Gas or Videsh Vankorneft.

The multinational oil and gas company is based in Dehradun, India.

Macedonia returns

Republic of Macedonia priced an upsized €450 million issue of 5 7/8% seven-year notes (BB-/BB+) at 98.598, according to a market source.

The issue was upsized from €300 million.

The deal was sidelined earlier when the opposition party challenged the government’s authorization to issue the notes, a market source said, adding that Macedonia’s return is due to the government receiving the authorization.

Bookrunner Citigroup will bill and deliver. Deutsche Bank, Erste Group and SG CIB were also bookrunners.

Bank of Georgia upsizes

JSC Bank of Georgia priced an upsized $350 million issue of 6% seven-year notes (B1/BB-) at 99.297 to yield 6 1/8% on Tuesday, according to a market source.

The issue was upsized from $300 million.

BofA Merrill Lynch and JP Morgan managed the sale.

Holding company JSC BGEO Group is the issuing entity for the notes.

The financial institution is based in Tbilisi, Georgia.

Albanesi mulls seven-year deal

Argentine energy company Grupo Albanesi (B3/B+) is expected to sell seven-year notes, according to a market source.

Guidance is in the high 9% context.

Credit Suisse, JPMorgan and UBS are leading the deal.

Proceeds will be used to refinance debt and for general corporate purposes.

Cubut Province amortizing deal

Argentina’s Chubut Province (B3//B) is expected to place an issue of 10-year amortizing notes with investors, according to a market source.

The notes will come with a 7.1-year average life.

BNP Paribas and BofA Merrill Lynch will be the leads.

Proceeds will be used to repay debt.

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