Kuwait bank sells $750 million bond; Oman may launch sukuk Tuesday; Brazil weakens again

By Rebecca Melvin

New York, May 22 – National Bank of Kuwait priced a $750 million bond issue on Monday at mid-swaps plus 100 basis points, which was tighter than talked, and the issue garnered favorable attention among market observers.

Price talk for the Kuwait bonds (Aa3//AA-) had been in the mid-swaps plus 115 bps area, which was revised from initial price talk of mid-swaps plus 125 bps.

The issuer is “the best and largest bank in Kuwait without a senior bond out there, meaning there are plenty of lines out there that can be filled up,” a market source said.

The source compared the Kuwait bank bond to that of First Abu Dhabi Bank, which was offered at a z-spread of plus 105 bps.

“Both banks clearly dominate their respective markets so it will be interesting to see where by both settle later in the week,” the market source said.

The new Regulation S and Rule 144A Kuwait bonds came with a 2¾% coupon, and JPMorgan, Citigroup, HSBC, NBK Capital, First Abu are stabilization agents for the five-year senior dollar-denominated bonds.

There was also speculation that Oman would be selling its $2 billion of sukuk as early as Tuesday to get the deal in before the holiday weekend coming up in the United Kingdom and the United States.

On Friday, S&P Global Ratings lowered its long- and short-term ratings on Oman to BB+/B from BBB-/A-3, citing the Omani government’a heightened external financing needs.

In March, Oman priced a combined $5 billion of notes due in five, 10 and 30 years.

Meanwhile, there was word that Nigeria is back in emerging markets. But there were no terms for the African deal as of yet, a source said.

“I think there are a couple more [new deal] announcements in the wings, as well,” a market source said. “I think the market is back on, risk on, and investors have money to go to work. Day by day, we should have more mandates coming out.”

This week, however, upcoming holidays were likely to compress market activity into a few days of the week. U.S. bond markets will close early on Friday and remain shut on Monday for the Memorial Day holiday. The United Kingdom also has a long weekend for a bank holiday, and Ramadan starts on Friday, which will quiet Islamic markets.

In Latin America, a relief rally that was underway in Brazil’s credit markets heading into the weekend fizzled on Monday, with selling pressure sending that market and others like Venezuela down to near session lows by the end of the day.

The corruption scandal surrounding Brazil President Michel Temer rattled Brazilian bonds, the real and the Bovespa on Thursday.

On Monday, Latin America markets opened up better than expected given the news over the weekend, Stephen Smigel, head of MUFG Securities’ Latin American credit sales and trading team, told Prospect News.

“The bonds held in reasonably well because of some of buying out of Europe and Asia, but Temer seems to be losing support amongst various constituencies, and the market is pricing in the possibility of the end of his regime and that reforms may not get passed.”

Brazil’s Petroleo Brasileiro SA bonds, which had been rallying on the back of very strong earnings numbers, are still down from the close of Wednesday, Smigel said.

Petrobras’ 2044 bonds closed Monday at 97½ bid, 98 offered. That compared to a close on Wednesday of 102½ bid, 103 offered.

Elsewhere, Lithuania auctioned €25 million of 0.3% government securities due 2021 on Monday.

The weighted average accepted yield was 0.067%, according to a term sheet. The minimum offered yield was 0.065%, and the maximum accepted yield was 0.085%.

The competitive bids totaled €57.2 million, with non-competitive bids for €2.6 million.

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