EM trading thinned by Cyprus troubles, holidays, Italy uncertainty; perpetuals see demand

By Christine Van Dusen

Atlanta, March 28 - The economic troubles in Cyprus remained top-of-mind for emerging markets investors and issuers on Thursday as the sovereign's banks opened for the first time in two weeks.

"Cypriot banks will open today for the first time since the crisis, although capital controls remain in place," a London-based analyst said. "It is a relatively quiet day so far."

The Markit iTraxx SovX CEEMEA ex-EU index moved out 5 basis points to Treasuries plus 212 bps at the end of the week. The corporate index widened 6 bps to 246 bps over Treasuries.

"Italian political fears are also weighing on markets," according to a report from Barclays.

This, plus the lighter volumes related to the upcoming Good Friday and Easter holidays, led to a quieter day for emerging markets assets.

Still, many bonds saw solid demand, including the recent perpetual notes from the Middle East.

Abu Dhabi Islamic Bank's recent $1 billion issue of 6 3/8% perpetual Islamic bonds that priced at par was seen Thursday at 105 bid, 105½ offered.

Abu Dhabi Islamic Bank, HSBC, Morgan Stanley, National Bank of Abu Dhabi and Standard Chartered Bank were the bookrunners for the Regulation S-only sukuk.

And Dubai Islamic Bank PJSC's $1 billion 6¼% perpetual notes that also priced at par ticked up to 100.55 bid, 100.95 offered.

Dubai Islamic Bank, Emirates NBD Capital, HSBC, National Bank of Abu Dhabi and Standard Chartered Bank were the bookrunners for the Regulation S sukuk.

Investor demand also was noted for the recent 2023 notes form Emirates NBD and Abu Dhabi Commercial Bank, the analyst said.

Turkey gets upgrade

Market sources were keeping an eye on Turkey, following Standard & Poor's upgrade of the sovereign's debt rating from B to BB+ on Wednesday.

But the upgrade didn't make much difference for Turkish bonds on Thursday, the analyst said.

"We have seen little impact from the Turkish upgrade so far," she said. "And Russia is generally wider on the back of the US Treasury movement yesterday."

SECO 'steady'

In other trading on Thursday, the new notes from Saudi Electricity Co. were unchanged in price, a trader said.

The deal included $1 billion 3.437% notes due 2023 that priced at par to yield 3.437%, or Treasuries plus 155 bps.

The second $1 billion tranche, 5.06% notes due 2043, priced at par to yield 5.06%, or Treasuries plus 190 bps.

Deutsche Bank and HSBC were the bookrunners for the Rule 144A and Regulation S deal.

"SECO is steady," the trader said.

Mriya Agro deal ahead

The upcoming issue of dollar notes from Ukraine-based agriculture business Mriya Agro Holding Public Ltd. received some attention on Thursday.

The company has mandated Citigroup, Credit Suisse, Goldman Sachs and Sberbank as bookrunners for a Rule 144A and Regulation S roadshow starting April 3.

"At the same time, Mriya announced a tender for the 2016 10.85% eurobonds at a purchase price of 106.75," the analyst said. "The bonds were trading at roughly this level, pre-tender. This follows recent tenders from MHP SA and Donbass Fuel & Energy (DTEK) alongside new deals."

Ukraine spreads move lower

Overall, most credits from Ukraine have been taking a hit as a result of market uncertainty, said Svitlana Rusakova of Dragon Capital.

"The bid and ask spreads were moving lower, reacting to weak European markets," she said.

Some demand was reported for Ukraine's 2021s at 105, a near-low.

And sellers were seen for the new JSC State Savings Bank of Ukraine (Oschadbank) issue of 8 7/8% notes due 2018 that priced at par.

"The new DTEK also traded heavy and stabilized close to 981/2," she said, noting that the bonds priced at 98.90.

UkrLandFarming trades down

Ukraine-focused UkrLandFarming plc's recent 10 7/8% notes due March 26, 2018 that priced at par to yield 10 7/8% were seen at 991/2, a trader said.

Citigroup, Deutsche Bank and Sberbank CIB were the bookrunners for the Rule 144A and Regulation S deal.

UkrLandFarming is an integrated agricultural producer based in Nicosia, Cyprus but focused on the Ukraine.

Sunac sells notes

On Wednesday, Sunac China Holdings priced a $500 million issue of 9 3/8% notes due April 5, 2018 at par to yield 9 3/8%, according to a company filing.

HSBC, BOCI International, Citigroup, ICBC (Asia), ICBCI Capital and Morgan Stanley were the bookrunners for the Regulation S deal.

The proceeds will be used to refinance debt and for general corporate purposes.

Sunac is a Tianjin, China-based residential and commercial property developer.

SmarTone prices bonds

Also from Asia, China's SmarTone Telecommunications Holding Ltd. sold $200 million 3 7/8% notes due April 8, 2023 at 98.905, according to a company filing.

HSBC, Standard Chartered Bank and UBS were the bookrunners for the Regulation S deal.

The proceeds will be used for general working capital purposes and for future investments.

Hong Kong-based SmarTone is a wireless communications company operating in Hong Kong and Macau. It is a subsidiary of Sun Hung Kai Properties Ltd.

EM defaults rose in 2012

In other news, the number of defaults reported in emerging markets climbed to 25 in 2012 from four in 2011, according to a report from Standard & Poor's.

"The emerging markets corporate speculative-grade default rate also increased, to 2.56% in 2012 from 0.59% in 2011," the report said. "The global rate rose to 2.47% from 1.73%."

This marked only the fourth time in the past 16 years that the emerging markets default rate was higher than the global rate, S&P said.

"The previous three times - 1998, 1999, and 2002 - coincided with sovereign stress periods in emerging markets. These were the Asian financial crisis and the sovereign crisis in Russia in 1998 and the default of Argentina in 2001," the report said. "Moreover, defaults in the emerging markets accounted for about 30% of global defaulters by issuer count, which is the highest in the 16 years for which we have default data in the region."

The 25 emerging markets defaults in 2012 affected about $21.93 billion in debt, up from $182 million in 2011. The year's biggest defaulter was BTA Bank, which filed for bankruptcy in July 2012.

"The Kazakhstan-based bank had $10 billion of debt obligations outstanding at the time of default," the report said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.