Primary hosts Argentina’s CGC; Saudi Arabia megadeal popular; Entre Rios sets roadshow

By Christine Van Dusen

Atlanta, Nov. 2 – Argentina’s Compania General de Combustibles SA (CGC) sold notes on a Wednesday that saw active trading of Saudi Arabia’s $17.5-billion megadeal and poor sentiment for emerging markets bonds.

“Tricky day, all told, and a far cry from Tuesday morning,” a London-based trader said.

Investors were mostly looking ahead to the U.S. election, a London-based analyst said.

“Recent polls indicate that the race for the Oval Office is becoming tighter again, which has weighed on markets,” he said. “With that in mind, the FOMC is expected to hold off from any hike today, despite supportive macro data over the last few days.”

Meanwhile, the three tranches of notes from Saudi Arabia opened about 5 basis points wider, a trader said.

“Failing to keep pace with rates,” he said.

The new $5.5 billion 2 3/8% notes due in 2021 that priced at 99.007 to yield 2.588%, or Treasuries plus 135 bps, traded Wednesday at 99.78 bid, 99.82 offered.

The $5.5 billion 3¼% notes due in 2026 that priced at 98.679 to yield 3.407%, or Treasuries plus 165 bps, traded Wednesday at 98.40 bid, 98.50 offered.

And the $6.5 billion 4½% notes due in 2046 that priced at 98.015 to yield 4.623%, or Treasuries plus 210 bps, traded Wednesday at 98.15 bid, 98.20 offered.

“Very active again,” a trader said.

Bahrain, Oman balanced

Trading of bonds from Bahrain and Oman were balanced, another trader said.

“However, they are a little exposed, being the weakest links the Middle East space, should oil come under pressure,” he said. “Liquidity outside of Saudi Arabia is a little patchy.”

Perpetual bonds from the Gulf region “took a breather” on Wednesday, moving down 25 cents to 50 cents, he said.

Equate notes active

The new issue of notes from Kuwait-based Equate Petrochemical Co. KSCC – $2.25 billion of senior notes due in 2022 and 2026 – was active on Wednesday, a trader said.

The company priced $1 billion 3% notes due 2022 at mid-swaps plus 195 bps and $1.25 billion 4¼% notes due 2026 at mid-swaps plus 270 bps.

The 2026s were holding at 99 on Wednesday, “despite a weaker tone,” he said.

Citigroup, HSBC, JPMorgan and NBK Capital were the global coordinators and joint bookrunners. Banca IMI, Mizuho Securities, MUFG and SMBC Nikko were also joint bookrunners.

South Africa eyed

Investors also continued to keep an eye on South Africa.

“South African asset performance remains driven by political events this week,” the analyst said. “Following the announcement of the dropped charges on Finance Minister Gordhan on Monday, the momentum faded away yesterday. Going into this morning, we see another turnaround in the political story, as President Zuma has withdrawn his request to block the release of the ‘state capture’ report.”

The report includes the prosecutor’s findings on the influence of business groups in political matters, such as the appointment of cabinet ministers and the awarding of contracts, the analyst said.

“The release of the report could provide further upside, not least as an indication of high institutional independence and strong governance in South Africa,” he said. “As a result, we are seeing the rand falling to below 13.5 per U.S. dollar and a better bid for South African bonds.”

Asian bond sales increase

Looking to Asia, bond sales in the region totaled $155 billion for the year to date, up 16½% over the previous year, according to a report from Schildershoven Finance BV.

“While the demand for Asian new issues slightly decreased in October, it still remains relatively high,” the report said. “Order books for Asia, ex-Japan, dollar bonds sold in October fell for a second month as investors became more picky ahead of the next week’s U.S. election and as the year approaches end.”

Orders for the $17.6 billion of Asian deals that priced in October totaled $55.4 billion, a slightly lower coverage ratio than was seen in September, the report said.

BRF reports earnings

In other news, Brazil’s BRF SA reported third-quarter earnings results that are neutral for credit quality, Schildershoven said.

The company’s revenue increased 11.4%, year over year, while leverage reached 2½ times, “a comfortable level for the company,” the report said.

Liquidity for BRF is “strong,” the report said. “Nonetheless, bond yields continue to be at a low level. BRF’s bonds look unattractive due to the duration of the company’s bonds, in terms of high hike expectations.”

CGC prints notes

In its new deal, Argentina’s Compania General de Combustibles sold $300 million 9½% notes due Nov. 7, 2021 at par to yield 9½%, a market source said.

The notes were talked in the mid-9% area.

BofA Merrill Lynch, Citigroup and Itau were the bookrunners for the deal.

The proceeds will be used to pay down debt and for working capital and capital expenditures.

The Buenos Aires-based company is engaged in gas distribution and hydrocarbons exploration and production.

Roadshow for Entre Rios

The Argentine province of Entre Rios is on a roadshow to market a dollar-denominated issue of notes, a market source said.

Citigroup, HSBC and Santander are the bookrunners for the possible deal.

The roadshow started on Tuesday in Boston and continued on Wednesday in New York.

Banco Macro sells bonds

On Tuesday, Argentina’s Banco Macro SA priced $400 million 6¾% notes due Nov. 4, 2026 at par to yield 6¾%, according to a press release and a market source.

Goldman Sachs and UBS were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds from the Rule 144A and Regulation S deal will be used to refinance debt, make loans and for working capital.

The issuer is a financial institution based in Buenos Aires.

Issuance from Central China

Central China Real Estate Ltd. priced $200 million 6¾% notes due Nov. 8, 2021 at par to yield 6¾%, according to a company filing.

Credit Suisse, DBS, Deutsche Bank, Morgan Stanley and Nomura Securities were the bookrunners for the Regulation S deal.

The proceeds will be used to repay existing indebtedness.

The investment holding company is based in Zhengzhou City, China, and primarily engages in property development in the Henan Province of China.

© 2015 Prospect News.
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