Primary hosts Eesti Energia, China Securities; Brazil, Petrobras deal with downgrades

By Christine Van Dusen

Atlanta, Sept. 10 – Estonia’s Eesti Energia AS and China Securities International Finance Holding Co. Ltd. were among the issuers to print new notes on Thursday, as Brazilian bonds came under pressure weakened and Turkish notes widened.

“We open with a flurry of selling and the Street putting out low offers,” a New York-based trader said.

Low-beta bonds from Latin America were off to a “weak start” on Thursday morning, with spreads moving out and Brazil suffering after its ratings downgrade, another New York-based trader said.

“Cash prices are down 25 cents to 50 cents, excluding Brazil,” he said. “Overall defensive tone, as equities are set to drop and screens are well offered.”

Brazil’s five-year credit default swaps spreads moved out to 391 basis points from 374 bps, he said, as cash bond prices hit new lows but did manage a bounce after the morning levels.

Said another trader, “Hopes are that markets will move on from this downgrade and take it as a Brazil-specific event rather than a hit against EM credit as an asset class.”

Brazil-based Petroleo Brasileiro SA (Petrobras) also got a downgrade, which pushed its spreads out 35 bps to 40 bps at the open on Thursday, another trader said. The company, which is embroiled in a corruption scandal, faces the possibility of moving down more notches.

“Spreads moved out about 35 bps to 40 bps on the open,” a trader said of Petrobras during the morning. “They have retraced about 10 bps, but it almost felt like a reluctant move.”

High-yield names from Latin America managed to move higher on the day, with Venezuela realizing small gains and Argentina climbing higher, another trader said.

Turkey curve widens

From Turkey, sovereign bonds were heavy again, with the curve moving another 8 bps wider, a London-based trader said.

“Turkey banks we have seen better selling as of late, which became more aggressive into yesterday’s close,” he said.

Asian credits closed the morning session 1 bp to 3 bps wider, weighed down by weaker equities overnight, a London-based trader said.

“The tone feels OK, with selective buyers, while most are sidelined waiting for primary supply,” he said.

KDB stays near reoffer

Korea Development Bank’s new $750 million issue of 3 3/8% notes due 2025 that priced Wednesday at 99.857 to yield Treasuries plus 115 bps was wrapped around reoffer in early trading on Thursday, a trader said.

The notes were initially talked at a spread in the 135-bps area.

BNP Paribas, BofA Merrill Lynch, Credit Agricole CIB, JPMorgan, KDB Asia, Standard Chartered Bank and UBS were the bookrunners for the Securities and Exchange Commission-registered offering.

“Onshore accounts were well-allocated,” he said. “The bonds closed at 116 bps bid, 114 bps offered.”

The proceeds will be used for general operations.

Chinese corporate bond rallies

The new notes that China’s Shanghai Pudong Development Bank Co. Ltd. sold on Wednesday – $500 million 2½% notes due 2018 that priced at 99.756 to yield Treasuries plus 150 bps – rallied on Thursday, a source said.

Agricultural Bank of China (Hong Kong), Citigroup, CCBI, HSBC, SPDB (Hong Kong), ANZ, Bank of Communications Hong Kong, Guotai Junan International and Haitong International were the bookrunners for the Regulation S deal.

The notes traded at 170 bps bid, 167 bps offered on Thursday morning.

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

Chexim notes trade

Export-Import Bank of China’s new $1 billion issue of notes due 2020 and 2025 that priced on Wednesday also received some attention in trading on Thursday, a trader said.

“Bonds widened at the break, with fast-money sellers,” he said.

The deal included $500 million 2.85% notes due 2020 that priced at 99.898 to yield Treasuries plus 130 bps and $500 million 3.8% notes due 2025 that priced at 99.646 to yield Treasuries plus 160 bps.

“The deal found support 10 bps wide from reoffer,” he said. “Europe came in with more accounts trimming allocations.”

Bank of China, Barclays, Bocom HK Branch, HSBC, JPMorgan and MUFG were the joint global coordinators for the Rule 144A and Regulation S deal. ANZ, Bank of China, Barclays, BOCOM HK Branch, HSBC, ING, JPMorgan, MUFG and Westpac were joint lead managers and joint bookrunners.

The five-year notes closed the Asian session at 147 bps bid, 142 bps offered. The 10-year notes finished the morning at 177 bps bid, 172 bps offered.

Eesti Energia sells bonds

In its new deal, Estonia-based utility Eesti Energia sold €500 million 2.384% notes due 2023 at par to yield 2.384%, or mid-swaps plus 160 bps, a market source said.

The pricing matched talk, set in the 160-bps area.

Deutsche Bank, Barclays, Nordea Bank Danmark and Swedbank were the bookrunners for the Regulation S deal.

The notes are part of a tender offer, wherein holders of the company’s €400 million 4¼% notes due 2018 and €300 million 4½% notes due 2020 can tender the notes for cash.

China Securities prices notes

Hong Kong-based China Securities International Finance – via CSCI Finance (2015) Co. Ltd. – sold $200 million 3 1/8% notes due Sept. 17, 2020 at 99.913 to yield 3.144%, or Treasuries plus 160 bps, a market source said.

China Securities International, Haitong International, ABC International, China Construction Bank, Wing Lung Bank, ICBC International, GF Securities Brokerage and China Galaxy International were the bookrunners for the Regulation S deal.

CSCI sets talk

China State Construction International Holdings Ltd. set talk in the Treasuries plus 185 bps area for a five-year issue of up to $200 million of notes, a market source said.

Other details were not immediately available on Thursday.

China State Construction International is a Hong Kong-based construction contractor.

Codelco deal attracts orders

The final book for Chile-based Corporacion Nacional del Cobre de Chile’s (Codelco) new $2 billion 4½% notes due 2025 – which priced Wednesday at 98.4586 to yield Treasuries plus 250 bps – was more than $6 billion from more than 250 accounts.

The notes were talked at a spread in the 275 bps area.

BofA Merrill Lynch, HSBC and JPMorgan were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used for general corporate purposes, including capital expenditures and to refinance debt.

About 80% of the orders went to the United States and Canada while 7% went to Latin America and 13% went to Europe, the Middle East and Africa.

The 2025 notes traded near their reoffer spread on Thursday, a trader said.

“I would look for 2022s and 2023s to possibly start widening out once this new supply is fully digested,” he said.

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