EM spreads widen on lackluster day; Vingroup, Bank Asya, FAGE, Qtel, Samruk-Energy on deck

By Christine Van Dusen

Atlanta, Dec. 10 - Vietnam-based real estate company Vingroup JSC set talk for an upcoming issue of notes and Turkey's Asya Katilim Bankasi AS (Bank Asya) planned a dollar-denominated deal on an otherwise quiet Monday marked by low volumes and limited activity.

The Markit iTraxx SovX index spread was wider by 3 basis points on Monday, while the corporate index moved out 6 bps.

"Lackluster session," a London-based trader said. "Case in point is the [International Petroleum Investment Co.] 2023 euro notes, last printing up at 102 1/8."

Still, some demand was noted for IPIC's bonds, as well as those from Abu Dhabi National Energy Co. (TAQA).

But little noise was made about Lebanon-based lender BankMed's new $500 million 5 3/8% notes due Dec. 14, 2017, which priced at 99.46 to yield 5½%, a market source said.

The notes priced in line with talk, set at the 5½% area, via Deutsche Bank in a Regulation S deal.

"Supply is next up on Qatar Telecom. Roadshow concludes tomorrow," the trader said. "Surely there are only five to six more meaningful trading days of the year, and dare I say, Qtel is probably the last significant transaction of the year from the region."

A London-based analyst agreed. "After the mass of new issuance last week in EM, this week should see a slowdown, with only Qtel and the small Samruk-Energy deal due," she said.

Kazakhstan's Samruk is planning up to $680 million of notes to fund its capital expenditure program.

Also expected this week is a $250 million add-on to the existing 9 7/8% notes due 2020 from Greece-based dairy FAGE International/FAGE USA.

TAQA notes keep gains

Abu Dhabi-based TAQA's two-tranche issue of $2 billion notes due Jan. 12, 2018 and 2023 held onto gains, a London-based market source said.

The deal included $750 million 2½% notes due 2018 that priced at 99.483 to yield Treasuries plus 200 bps. The notes finished Monday's session at 100½ bid, 100.60 offered.

The second tranche of $1.25 billion 3 5/8% notes due 2023 priced at 99.404 to yield 210 bps over Treasuries. On Monday the notes were seen at 100¾ bid, 101 offered.

BNP Paribas, Citigroup, HSBC and Standard Chartered were the bookrunners for the Rule 144A and Regulation S deal.

Middle East in focus

Notes from Emirates Islamic Bank were better offered during the session, and further curve flattening was seen for Qatar's 2014s and 2015s.

"Qatari Diar's 2015s are feeling well offered," a trader said.

Demand was also spotted for Kuwait-based Kipco.

"The bonds look interesting, versus peers," he said.

Meanwhile, Abu Dhabi Islamic Bank's perpetual notes traded between 105.05 and 105.20 for most of the session. The 6 3/8% notes recently priced at par via Abu Dhabi Islamic Bank, HSBC, Morgan Stanley, National Bank of Abu Dhabi and Standard Chartered Bank in a Regulation S-only sukuk.

"Still a little off the all-time high but some decent two-way at this level," he said.

Morocco notes struggle

Morocco's recent $1.5 billion issue of 10- and 30-year bonds was "struggling" on Monday, a London-based market source said.

The deal included a $1 billion tranche of 4¼% 10-year notes that priced at 99.228 to yield 4.346%, or 275 bps over Treasuries.

Those notes were trading Monday at 99.12 bid, 99.37 offered.

A $500 million tranche of 5½% 30-year bonds priced at 97.464 to yield 5.677%. The bonds sold with a spread of Treasuries plus 290 bps. Those notes were seen Monday at 97.12 bid, 98.12 offered.

Barclays, BNP Paribas, Natixis and Citigroup were bookrunners for the Rule 144A and Regulation S deal.

Ukraine bonds move lower

Looking to Ukraine, sovereign debt has been moving lower, ever since Moody's Investors Service downgraded the country's long-term rating to B.

The recent 9% notes due 2017 have moved below par on the bid side, said Svitlana Rusakova of Dragon Capital.

The sovereign's 2020s have been spotted inching down, to 102½ bid, 103½ offered.

"Corporate names were more resilient," she said. "Yet a few quotes were adjusted a bit lower."

Metinvest's 2015s were seen at 102 bid, 103 offered while its 2018s were quoted at 95¾ bid, 96¾ offered.

"Oschadbank weakened to 94¾ bid, 95¾ offered," she said.

PDVSA bonds rise

From Latin America, bonds from Petroleos de Venezuela SA (PDVSA) rose sharply Monday as investors wondered whether Venezuelan leader Hugo Chavez's health crisis - and the possible succession of another leader - could lead to a more business-friendly regime.

The 58-year-old Chavez returned to Cuba on Monday for another cancer-related surgery. In response, the name was "by far the most widely traded" of the day, a trader said.

The 8½% notes due 2017 moved up nearly 2 points to 99, while the 9% notes due 2021 put on 3 points to end at about 97. The latter had hit par earlier in the day, but came back in a bit, still ending higher than Friday levels.

The 9¾% notes due 2035 gained 5 points, closing with a 99 handle. The 5½% notes due 2037 increased about 3½ points to 71¾ while the 5 3/8% notes due 2027 earned about 1½ points to close at 711/2.

Vingroup, FAGE set talk

In deal-related news, Vietnam-based real estate company Vingroup gave initial guidance of 12% to 12½% for its planned issue of dollar-denominated notes due in five years, a market source said.

Credit Suisse and Citigroup are the bookrunners for the Rule 144A and Regulation S deal, which is expected to price this week.

The notes are guaranteed by Royal City Real Estate Development and Investment JSC and Vincom Retail Co. Ltd.

Also giving price talk on Monday were Greece-based dairy FAGE, which plans a $250 million add-on to the existing 9 7/8% senior notes due in 2020 via Citigroup Global Markets.

Price talk was set at 100 to 100½ for the Rule 144A and Regulation S deal, which is expected to come to the market on Wednesday.

Bank Asya plans notes

Turkey's Bank Asya is planning an issue of dollar-denominated Islamic bonds, a market source said.

No other details were immediately available on Monday.

In other news from Turkey's banking sector, a court determined that lender Isbank does not owe 632 million liras' worth of back taxes.

Other charges, outlined on a tax bill, have not yet been waived.

"This is not a big surprise, and Isbank management expects that the full amount will be cleared, and as such has not provisioned for it," the London analyst said. "Given the high likelihood of the remainder being ruled in favor to the bank, we do not consider this news to have a major impact on spreads, although it should support investors' sentiment for the credit."

Stephanie N. Rotondo and Paul A. Harris contributed to this article.

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