Akbank steady out of the chute; Kenya, Belarus launch benchmark deals; volatility picks up

By Rebecca Melvin

New York, Feb. 21 – Akbank TAS’ newly priced 6.8% notes were stable-to-better out of the chute on Wednesday after the Turkish lender priced $400 million of the 10-year paper at par and with pricing that was slightly tighter than initial talk in the high 6% area, according to a market source.

Also notable on Wednesday were the launches of Kenya’s $2 billion of eurobonds in two tranches and Belarus’ $600 million of 12-year notes in the early going.

The Kenya 10-year and 30-year notes launched to yield 7¼% and 8¼%, respectively, while the Belarus notes launched with a 6.2% yield.

There were also announcements regarding a roadshow for $300 million of five-year notes for Georgia Capital JSC, which is demerging from JSC Bank of Georgia, and a launch of a debut bond for Moldova’s Trans-Oil Group of Cos.

The backdrop in emerging markets was accommodative, a market source said, at least initially on Wednesday. Turkey’s military offensive along its border with Syria was said to dampen investor enthusiasm for the Akbank deal late Tuesday.

The fact that rates were more stable initially and headlines were a little less eventful than on Tuesday created a window for new issues to get done, the market source said.

Later the backdrop changed when toward the end of the U.S. trading session stocks and Treasuries sold off in reaction to the Federal Reserve’s January policy meeting minutes, which suggested stronger-than-expected economic growth could touch off a faster pace of rate tightening.

The yield on the U.S. Treasury 10-year benchmark spiked up to 2.94% late Wednesday.

After the market close, a New York-based market source said, “The market feels soft. Rates reacted to the Fed minutes where members ‘suggest’ additional rate increase. Some believe that higher inflation is already here, and thus that the Fed will speed up or increase the number of hikes.”

The constructive tone for emerging market debt during London’s session stood in contrast to the New York session, which weighed on Latin America, where there were no cross-border new deal announcements and the secondary market closed lower.

High-beta names underperformed and low-beta credits showed a somewhat firmer footing, a market source said. “I think the rates move is overshooting the underlying inflation/wage data, but we shall see.”

New Akbank deal

Akbank’s new 6.8% notes were priced at the tight end of 6.8% to 6.85% guidance and down from initial talk in the high 6% area.

They priced with a spread of five-year mid-swaps plus 402.9 basis points. That was 100 bps tighter than the spread on notes priced last year, the market source said.

The 10-year notes are non-callable until April 27, 2023.

Akbank is a lender based in Adana, Turkey. The order book was in excess of $725 million for the Rule 144A and Regulation S notes, which were sold via bookrunners BNP Paribas, Citigroup, HSBC, Mizuho, MUFG and Societe Generale CIB.

Other new deals

Also on Wednesday, two Singapore-based financial companies came to market. United Overseas Bank Ltd. priced £350 million of five-year floating-rate covered bonds at par to yield three-month Libor plus 24 bps, and Oversea-Chinese Banking Corp. Ltd. mandated banks to arrange a euro-denominated benchmark offering of five-year notes.

The banks for the OCBC deal are Barclays, BNP Paribas, Nord/LB, OCBC Bank and UniCredit.

Trans-Oil Group, which is issuing a smaller than expected deal via Aragvi Finance, was eying a 10% area yield on its $225 million of five-year notes.

The company will mainly use the proceeds to refinance most of its secured debt.

Aragvi is an exporter of agricultural commodities from Moldova, and this is its maiden deal in the international bond market.

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