Ukraine prices $2 billion dual trancher; two sukuk issues hit market; Brazil outperforms

By Rebecca Melvin

New York, Oct. 25 – Ukraine launched and priced $2 billion of long five-year and 10-year notes on Thursday, and several new deals were in the market after pricing on Wednesday as market volatility continued to rock most asset classes.

Ukraine priced $750 million of 9% notes due 2024 and $1.25 billion of 9¾% notes due 2028, with final terms tighter by a full 25 basis points compared to initial talk for both tranches.

The Ukraine deal comes on the heels of the sovereign’s new $3.9 billion agreement with the International Monetary Fund, which was forthcoming after the country met a key condition in raising national household gas tariffs, which was politically unpopular. The deal was Ukraine’s first since last fall when it priced a $3 billion 7 3/8% 15-year bonds. The older paper is now yielding 9.417%.

Order books for the new notes closed at about $4.9 billion.

In the Middle East and Africa region, two new sukuk deals hit the market including Oman’s large $1.5 billion seven-year sukuk, which priced at par to yield mid-swaps plus 280 bps. That was tighter by about 5 bps compared to talk. The sukuk has a distribution rate of 5.932%.

Gulf International Bank, HSBC, JPMorgan, KFH Capital and Standard Chartered Bank were joint bookrunners for the Rule 144A and Regulation S sukuk.

The second sukuk that was new to the market was a $500 million issue of seven-year sukuk certificates priced by United Arab Emirates’ utility National Central Cooling Co. PJSC, or Tabreed. This deal has a distribution rate of 5½%.

Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, J.P. Morgan Securities plc and Mashreqbank were bookrunners for the Regulation S sukuk, which will be listed on the Irish exchange.

Korea Housing Finance Corp. also priced an international deal under Rule 144A and Regulation S for €500 million of 0.75% five-year covered bonds.

The deal with a yield of mid-swaps plus 40 bps, which was the tight end of 40 bps to 45 bps guidance and initial price talk in the mid-swaps plus 50 bps area.

BNP Paribas (billing and delivery), DBS Bank Ltd., ING and Societe Generale were joint lead managers for the deal for the housing finance company based in Seoul, South Korea.

Elsewhere, Latin America’s primary debt market was quiet, with its secondary market “doing okay versus the rest of the market,” according to a New York-based market source.

The market was “going through the ebbs and flows of very volatile sessions across asset classes,” the source said.

On Thursday the Latin America space looked as though it would slide into the weekend on more or less stable footing.

The week started with a very poor tone, the market source said. “But price or spread action did not suggest any less preference for the region. We saw some improvement in [Wednesday’s] session, and think we will have a stable close going into the weekend,” the market source said.

Brazil continued to outperform the Latin America market, as those assets ride a wave of enthusiasm in the last several weeks on expectations that the right-wing, market friendly candidate, Jair Bolsonaro, will win the final run off ballot on Sunday. A Bolsonaro victory will mark an about face in Brazilian politics that had been dominated by leftists.

Despite the overall weakness in Latin America and the rest of the emerging markets debt market, Brazil is outperforming the rest of Latin America.

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