OTP Bank sells bonds amid tighter spreads, thinner volumes; Pemex, Tencent, others ahead

By Christine Van Dusen

Atlanta, Nov. 14 - Hungary's OTP Mortgage Bank Ltd. sold notes as emerging markets assets regained some of their safe-haven status on a Monday that still saw below-average volumes.

More broadly, there was continued caution about Italy, Greece and the overall economic picture in Europe.

"So we have a new Italian and Greek prime minister, and the markets are giving them the benefit of the doubt," a London-based trader said.

Indeed, the Markit iTraxx SovX index spread opened 10 basis points tighter, and most cash bonds were 5 bps to 10 bps tighter.

"But they're not exactly screaming either, as a reminder of the problems remaining," he said.

Meanwhile, several issuers - including Abu Dhabi Commercial Bank, State Oil Co. of Azerbaijan (Socar), Peru-based Corporacion Lindley SA, Mexico's Petroleos Mexicanos SAB de CV and China-based Tencent Holdings Ltd. - took steps toward the market in an effort to get deals done before the end of the year.

"There's more and more talk and mandates concerning new issues as the window gets smaller into year-end," a trader said. "It does appear a little strange to be talking about new issues when banks and Europe continue to be under decent stress, but then I suppose the Middle East and North Africa region continues to tick along and is viewed as being somewhat immune from the malaise elsewhere."

But volumes are expected to remain thin through the end of the year, another trader said.

"Dealing desks won't be looking to increase line items into year-end," he said. "A lot have already lost colleagues, with reportedly more banks to announce job cuts soon. It will remain thin and tricky into year-end. But at least there should be some new issues to dip the toe into."

OTP Bank prints notes

In its new deal, Hungary's OTP Mortgage Bank priced a €750 million issue of floating-rate notes due Nov. 18, 2013 at par to yield Euribor plus 525 bps, a market source said.

Citigroup was the bookrunner for the deal.

The notes were guaranteed by OTP Bank, a lender based in Budapest.

On Friday, Seoul-based economic development company Korea Land & Housing Corp. priced a CHF 150 million issue of notes due Dec. 12, 2013 at par to yield Libor plus 100 bps via Deutsche Bank.

And India-based lender IDBI Bank Ltd. sold RMB 650 million notes due Nov. 18, 2014 at par to yield 4½%, a market source said.

The notes priced in line with talk, set at 4½%, via HSBC in a Regulation S deal.

ADCB, Socar plan deals

Monday also saw Abu Dhabi Commercial Bank planning a $750 million sukuk issue of notes due 2016, a market source said.

No other details were immediately available on Monday.

And Azerbaijan's Socar mandated Citigroup, Deutsche Bank and RBS for a possible offering of dollar-denominated notes, a market source said.

In May, the company announced plans for a $500 million deal that was expected to come to the market in June but did not materialize.

Roadshows for Lindley, Pemex

In other deal-related news, Peru-based Corporacion Lindley - a bottler and distributor of Coca Cola Co. beverages - mandated Citigroup and JPMorgan for a dollar-denominated issue of notes, a market source said.

A roadshow for the Rule 144A and Regulation S transaction is underway. The marketing trip will travel to Lima, Santiago, London, New York, Boston and Los Angeles before concluding on Nov. 17.

And Mexico-based petrochemical company Pemex is planning a roadshow from Nov. 22 to Nov. 24 for a possible issue of notes, a market source said.

Bank of America Merrill Lynch, HSBC and Scotia Capital are the bookrunners for the deal.

Tencent Holdings on deck

China-based Tencent Holdings is planning an issue of senior notes via Goldman Sachs, Deutsche Bank, Credit Suisse and HSBC, according to a company filing.

The proceeds from the Rule 144A and Regulation S offering will be used for general corporate purposes, including working capital.

Tencent Holdings is a holding company focused on online advertising and internet and mobile phone services and is based in Shenzhen, China.

Turkey tightens

In trading on Monday, Turkey's sovereign bonds were 5 bps to 6 bps tighter on the longer end of the curve while corporate prices were broadly unchanged, a trader said.

"Turkey is only a touch off earlier highs," another trader said.

Russia's quasi-sovereign bonds were also mostly unchanged.

"Given the European chaos of the last week, to have most spreads close to unchanged is an impressive performance," he said.

Among Russian corporate bonds, Vimpelcom was getting the most attention on Monday.

"Russian corporates are still solid as a rock," the London trader said.

Morocco, Namibia trade well

Looking to the Middle East and Africa, Morocco continued to trade well, a trader said.

So did Namibia, while Cairo-based African Export-Import Bank's 2016 held fairly steady.

Lebanon was also steady, he said.

"The next debt swap has been mandated," he said. "We just await details."

And the recent issue of notes from Abu Dhabi's Union National Bank PJSC - $400 million 3 7/8% notes due 2016 that priced at 99.05 on Nov. 2 - caught a bid on Monday.

"They're closing 25 cents better versus last week," a trader said. "They were last seen at 99.10 bid, 99.20 offered."

Dubai, IPIC in focus

Dubai was a bit heavy into the close but Dubai Water and Electricity Authority's 2020s are tighter by 60 bps on the month, he said.

Investors were also focused on Abu Dhabi's International Petroleum Investment Co.

"The recent IPICs are still liquid and better buyers were seen today," he said. "The older deals are really taking a back seat to the 2017s, 2022s and 2041s at the moment, with the possible exception of the 2015s."

The 2015s have "cheapened up," he said.

"I think it looks like a safe-ish place to park some cash, trading right at par and offering a pick-up to the sovereign," he said.

BTA Bank gets downgrade

Market-watchers were also keeping an eye on Kazakhstan's BTA Bank, which received a downgrade from Fitch Ratings in reaction to the company's latest financial results and speculation that the lender could default again.

In response, BTA Bank's 2018s were off 5 points to 41, the London trader said.

"It's brought selling to the KazMunaiGaz curve, which is now 15 bps wider today," he said.

Inflows decline

In other news, emerging markets bond funds saw inflows of $415 million for the week ended Nov. 9, according to data tracker EPFR Global. That's down from the previous week's $671 million.

"Risk appetite, while clearly waning, has yet to sink to mid-August levels," EPFR said in a report. "Emerging markets bond Funds maintained their recent inflow streak, with hard currency funds again the main drivers."

Indeed, hard currency funds accounted for ¾ of the total inflows for EM bond funds, said senior analyst Cameron Brandt.

And flows into emerging markets corporate bond funds climbed to a 14-week high.

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