Far East Horizon, China Merchants, Montenegro do deals; Ukraine demand limited by turmoil

By Christine Van Dusen

Atlanta, Dec. 4 - China’s Far East Horizon Ltd., China Merchants Land Ltd. and Montenegro sold notes on Wednesday as spreads widened and Ukraine’s bonds felt the impact of a failed government ouster and continued protests about the rejection of a trade agreement with the European Union.

Ukraine’s sovereign bonds have seen some “bottom-fishing” so far this week amid limited demand, which may also have been inspired by a report that Russia is allowing Ukraine to delay gas payments, said Svitlana Rusakova of Dragon Capital.

“No confirmation on that from Gazprom, though,” she said. “Corporates were weak in the usual catch-up move.”

Overall, the events in Ukraine are “favorable” for the market, according to a report from Commerzbank.

“The most likely course of events is continued depletion of reserves and credit-rating cuts by one or more notches,” the report said. “We don’t expect default on debt.”

As credit risk rises and downgrades occur, “we think the chances of events such as pulling of commercial credit lines and drop in rollover rates will increase, which may also trigger devaluation, and bond price volatility could remain high,” Commerzbank said.

“We suggest waiting for more clarity on policy before buying into short Ukraine debt,” the report said.

Meanwhile, bonds from Russia saw “neutral dynamics” in early trading on Wednesday, according to a report from UFS Investment Co.

Volatility was expected to increase after the release of economic data from the United States.

“Among the supporting factors for the Russian eurobond market was significant strengthening of oil quotations after the data on the strong decrease in stocks in the United States,” the report said.

Also on Wednesday, Gabon set talk and roadshows were planned for South Korea’s KB Kookmin Bank and Korea National Oil Corp. (KNOC).

Sovereign spreads move out

The Markit iTraxx SovX CEEME ex-EU index spread on Wednesday moved to 324 basis points over Treasuries, wider from Monday’s level of 316 bps.

“Asian markets traded with mixed sentiment, with Japanese equities falling, while Chinese stocks rallied,” a London-based analyst said. “The rest of the week is laden with data releases that will drastically change tapering possibilities by the Fed in its upcoming FOMC meeting.”

Isbank pricing ‘generous’

One trader was keeping an eye on the Turkish banking space and the new issue of notes from Turkey’s Turkiye Is Bankasi AS (Isbank). The $400 million 7.85% notes due Dec. 10, 2023 priced at par to yield 7.85%.

BNP Paribas, Commerzbank, JPMorgan, Morgan Stanley and Standard Chartered Bank were the bookrunners for the Rule 144A and Regulation S deal.

“We do not think this will be the last issue of the year, with one or two more Turkish banks lined up for tapping the market ... ahead of 2014,” she said. “However, appetite for more paper is questionable. It seems that the market was not very enthusiastic.”

The bank had initially been expected to issue $500 million of notes but downsized to $400 million and attracted an order book of about $800 million, she said.

“Pricing is also generous, issued at the upper end of the guidance, some 30 bps premium over old T2,” she said. “Considering they are exactly the same in structure and bond documentation language, the premium paid on the new issue for less than one-year maturity extension is unjustified, in our view.”

Sekerbank tries issuance again

Also from Turkey, Sekerbank TAS has received approval to issue up to $300 million of debt, a market source said.

This follows two previous and unsuccessful attempts to sell bonds. In April the Istanbul-based lender canceled plans for a dollar-denominated offering of five-year notes.

The notes were talked in the 5¼% area.

Citigroup, Standard Chartered and Unicredit were the bookrunners for that Rule 144A and Regulation S deal.

In June Sekerbank revived its plans for a deal, announcing the size would total €300 million.

Neither deal materialized.

“Following the unsuccessful pricing of a debut senior issue earlier this year, the bank might be prone to go for a subordinated paper, which will also help its capital,” a trader said.

Gabon sets talk

Gabon set talk in the 6½% area for its upcoming dollar-denominated issue of benchmark-sized notes due in December of 2024, a market source said.

Citigroup, Deutsche Bank and Standard Chartered Bank are the bookrunners for the Rule 144A and Regulation S deal.

A roadshow concluded on Wednesday in Boston. Pricing is expected to take place on Thursday.

The new deal is part of an exchange and tender offer of Gabon’s $1 billion 8.2% notes due in 2017.

Kookmin sets roadshow

South Korea’s Kookmin Bank will set out on Dec. 9 for a roadshow to market a possible issue of notes with BofA Merrill Lynch, Citigroup, Deutsche Bank, JPMorgan, Societe Generale CIB and Standard Chartered Bank.

And Korea’s KNOC has mandated Barclays, Citigroup, Deutsche Bank, HSBC, Korea Development Bank and UBS as bookrunners for a roadshow starting Dec. 9, a market source said.

The roadshow will take place in Asia, Europe and the United States.

An issue of notes may follow.

Ooredoo dips

Qatar’s Ooredoo QSC saw its new issue of 3.039% notes due Dec. 3, 2018 that priced at par trade Wednesday at 99.97 bid, 100.07 offered, a trader said.

“Street takes my 2018s,” he said.

On Tuesday the notes were seen at par bid, 100.10 offered, unchanged from Monday.

The notes priced at a spread of mid-swaps plus 160 bps with DBS Bank, Deutsche Bank, HSBC, QInvest and QNB Capital in a Regulation S deal.

Aldar trades down

Abu Dhabi-based Aldar Properties PJSC’s new $750 million 4.348% notes due Dec. 3, 2018 that priced at par were quoted Wednesday at 100.93 bid, 101.18 offered, a trader said.

On Tuesday the notes were spotted at 101.15 bid, 101.55 offered, a trader said.

The notes came to the market at a yield of 4.348%, or mid-swaps plus 290 bps.

Standard Chartered Bank, Dubai Islamic Bank, First Gulf Bank, Goldman Sachs and National Bank of Abu Dhabi were the bookrunners for the Regulation S deal.

Chinese corporate sells bonds

In a new deal on Wednesday, China’s Far East Horizon sold RMB 700 million 5.45% notes due Dec. 11, 2016 at par to yield 5.45%, a market source said.

HSBC and Standard Chartered Bank were the bookrunners for the deal.

Far East Horizon is a financial leasing unit of Sinochem Group, which is a Hong Kong-based business conglomerate with interests in agriculture, energy, chemicals, real estate and finance.

New deal from developer

China Merchants Land priced $500 million 4.021% notes due Dec. 11, 2018 at par to yield 4.021%, a market source said.

ICBC Asia, BofA Merrill Lynch, DBS Bank, Barclays, CCB International, China Merchants Securities, ING, JPMorgan and UBS were the bookrunners for the Regulation S deal.

The proceeds will be used for general corporate purposes.

The issuer is a real estate and property developer based in Hong Kong.

Montenegro prints notes

Montenegro priced €80 million notes due Dec. 9, 2016 at par to yield Euribor plus 595 bps, a market source said.

The notes were initially talked at a spread in the Euribor plus 595 bps area.

Morgan Stanley was the bookrunner for the Regulation S deal.

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