Montenegro, Kuwait Projects sell notes; some Lat-Am spreads narrow, prices mixed; Koc ahead

By Christine Van Dusen

Atlanta, March 8 – Montenegro and Kuwait Projects Co. sold notes on a Tuesday that saw Latin American debt trade well as emerging markets assets distanced themselves from weakness in commodities and equities.

“Busy day, in terms of economic releases, with Asian markets driven by weak China export data,” a London-based strategist said. “Most of the attention has been grabbed by the EU-Turkey summit in Brussels yesterday.”

The parties appear to be nearing an agreement on how to handle the influx of refugees into Turkey, he said.

“Yet EU leaders have become more concerned also with freedom of press in Turkey after Turkey seized the government-critical newspaper Zaman last week and put the Cihan News Agency under control of government trustees yesterday,” he said. “We, however, do not expect that the recent events pose a threat to the deal.”

Flows for emerging markets debt were two-way and “constructive,” with some profit-taking, a trader said.

And some spreads tightened, particularly in Latin America, where Brazil’s five-year credit default swaps spreads closed at 408 basis points from 410 bps and Mexico’s finished almost unchanged at 177 bps.

“Cash prices finish mixed, with some curves markedly higher, whereas others are mostly unchanged from yesterday,” a New York-based trader said.

High-yield names from the region were mixed on the session, with Argentina mostly unchanged and Venezuela moving lower.

Argentina’s Bonar 2024s finished at 108 from 108.25, while Venezuela’s 2027s closed at 39.50 from 41, and PDVSA’s 2017s ended the day down at 51.50 from 53.50, he said.

“Flows continue to be on the lighter side,” he said. “With dismal Chinese data and correspondingly weak risk markets, Lat-Am credit has been able to move past these headwinds and manage to etch out gains.”

Saudi Arabia could issue notes

Meanwhile, Saudi Arabia was reportedly seeking a syndicated loan of up to $10 billion to fund its budget deficit, the strategist said.

The sovereign “will likely offer the largest lenders the opportunity to participate in the potential launch of a sovereign bond,” he said. “The kingdom started to tap local bond markets last year.”

Koc Holding on deck

Investors were looking ahead to the new Rule 144A and Regulation S issue from Turkey’s Koc Holding AS.

The Istanbul-based industrial conglomerate is expected to print a benchmark-sized issue of dollar-denominated notes due in seven years as soon as Wednesday, a trader said.

The Istanbul-based industrial conglomerate previously announced plans for up to $1 billion of bonds this year.

Montenegro sells bonds

In its new deal, Montenegro priced €300 million 5¾% notes due March 10, 2021 at 98.947 to yield 6%, according to a filing from the sovereign.

Deutsche Bank, Citigroup, Erste Group and Societe Generale CIB were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used for general budgetary purposes.

Issuance from Kuwait Projects

Kuwait Projects Co. priced $500 million 5% notes due March 15, 2023 at par to yield 5%, or mid-swaps plus 324.6 bps, a syndicate source said.

The notes were initially talked at a yield in the 5¼% area.

BNP Paribas, Citigroup, HSBC and JPMorgan are the bookrunners for the Regulation S deal.

The books were said to be about $1.25 billion.

The issuer is a Kuwait City-based public investment holding company for a diverse group of businesses.

“Kuwait is outperforming its [Gulf region] peers in the current low oil environment, given the strong fiscal and external metrics, as well as the low fiscal breakeven oil prices,” the strategist said. “At the current levels, the new deal appears to be attractive versus the current 2019 bonds.”

Hyundai attracts orders

The final book for South Korea-based Hyundai Capital Services Inc.’s new $500 million 2 7/8% notes due 2021 that priced Monday at 99.815 to yield Treasuries plus 150 bps was $1.2 billion from 98 accounts, a market source said.

BofA Merrill Lynch, Citigroup and Credit Agricole CIB were the bookrunners for the Rule 144A and Regulation S deal.

On Tuesday, the notes were spotted in the secondary market between Treasuries plus 149 bps and 147 bps.

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