Ferrexpo, Grupo Aje, Georgia move ahead on quieter day for EM; Inkia, Cemex trade well

By Christine Van Dusen

Atlanta, March 30 - Ukraine-focused Ferrexpo plc, Peru's Grupo Aje and Georgia were among the emerging markets issuers that took steps toward the market on a Wednesday that saw investors' risk aversion begin to wane again.

The JPMorgan Emerging Markets Bond Index Plus spread started the day tighter by 2 basis points, at Treasuries plus 254 bps.

"It's been relatively quiet," said Luz Padilla, portfolio manager for the DoubleLine Emerging Markets Fixed Income Fund. "I think the market has done remarkably well given all of the events around the world. I think it's just a steady type of performance."

One reason EM markets haven't reacted more negatively to the ongoing turmoil in the Middle East, for example, is that they expect the oil to keep churning no matter who's in charge, Padilla said.

"They're thinking that at some point things will normalize," she said. "That probably is true, but how you get there is the problem."

Aje, Georgia plan deals

An upcoming bond offering from Peru-based cola producer Grupo Aje - $200 million of bonds - is expected to price before the end of the year, a market source said.

Also from Latin America, Mexico-based branded foods producer and distributor Sigma Alimentos SA de CV will embark on a roadshow starting Friday with Merrill Lynch and JPMorgan, a market source said.

The marketing trip will begin in Los Angeles and travel to New York and Boston before concluding on April 6 in Chicago.

Also planning a roadshow is the Ministry of Finance of Georgia, which mandated Goldman Sachs and JPMorgan as bookrunners for a dollar-denominated issue of benchmark-sized notes, a market source said.

The roadshow for the Rule 144A and Regulation S deal will begin Monday.

Ferrexpo whispers notes

Also on Wednesday, Ukraine-focused and Swiss-based resources company Ferrexpo whispered its planned issue of five-year dollar-denominated notes at the 8¼% area.

JPMorgan, Morgan Stanley and UBS are the bookrunners for the Rule 144A and Regulation S deal.

And South Korea's Hana Bank mandated Barclays Capital, Citigroup, Hana Daetoo Securities, HSBC and Standard Chartered for a roadshow, a market source said.

The marketing trip will begin Monday in New York and London and travel to Boston, Los Angeles and Singapore before wrapping up on April 7 in Hong Kong.

Inkia trades up

One London-based market source was tracking the $300 million 8 3/8% notes due 2021 issued on Tuesday by Peru-based Inkia Energy Ltd.

The notes priced at 99.169 to yield Treasuries plus 362.5 bps via Merrill Lynch and Credit Suisse in a Rule 144A and Regulation S transaction.

"That went well," he said. "It's trading up half a point."

Said a California-based market source: "That's a utility credit, and that seems to be doing well."

Cemex performs

Also trading up about a half-point on Wednesday was Mexico-based building materials supplier and cement producer Cemex SAB de CV's $800 million issue of floating-rate notes due Sept. 30, 2015.

The notes came to market Tuesday at 99.001 with a coupon of three-month Libor plus 525 bps with bookrunners Merrill Lynch, JPMorgan and RBS.

The final book for the deal was $2 billion from 140 accounts, a source said.

"That was initially supposed to be $500 million," the London-based source said. "That's interesting. We don't get many floating-rate notes in EM. Maybe with worries about interest rates it makes a lot of sense for investors."

PTTEP 'disappointing'

The market was also paying some attention to the $700 million notes due 2021 from petroleum exploration and production company subsidiary PTT Exploration and Production Canada that priced Tuesday.

The notes came to market at par to yield 5.692%, or Treasuries plus 225 bps, via Barclays Capital in a Rule 144A and Regulation S transaction.

"They're an infrequent issuer that came at the tighter end of the range," a market source said. "That's been kind of disappointing."

The market also continued to eye Belarus, which on Tuesday let its currency fall 10% against the dollar even after offering assurances that the sovereign would not allow its currency to devalue. Belarus also suffered a one-notch downgrade to B2 from Moody's Investors Service.

"There's a lot more chat about Belarus today," the London-based market source said. "The bonds are lower again, but there are good two-way flows."

The sovereign's 2018 bonds were seen trading Wednesday at 87 bid, 87.50 offered.

"That's up a little from the lows at 86, but well down on the week," he said.

Russia off, MENA stays solid

In other trading on Wednesday, some weakness was seen in Russia while most Middle Eastern and North African credits held on to the previous day's gains, the London-based market source said.

Qatar National Bank's 2015 notes were seen at 97.65 bid, 97.90 offered.

"We continue to trade good size on this bond," a London-based trader said. "It's one of the leading banks in the region."

International Petroleum Investment Co.'s latest euro- and sterling-denominated bonds remained liquid on Wednesday.

"It's had a good week, with bonds 15 to 25 bps tighter. Even the unloved sterling tranche is finding some support. That's also 20 bps better on the week," he said. "Supply-wise, the IPIC bonds are starting to feel much better placed, and retail continues to buy '16s."

He also traded some of the 2020 notes from Kuwait-based Kipco. And paper from Egypt remained well supported on Wednesday.

Dubai names tighter

Looking to Dubai, corporate issuer Dubai Holdings was "bid up, with their 2014 euro bond a cool 130 bps tighter over the week," the London-based trader said. "The Dubai World resolution has been a step forward, trade and tourism is clearly clicking along nicely and the upheaval across the region, to my mind, was never going to hit Dubai."

And Gabon's 2017 bonds were tighter, about 60 bps narrower on the week.

Turkey, meanwhile, was having a "tighter start with the positive breeze from Asia ahead of the quarter-end," he said.

"The sovereign curve has recouped most of its losses from yesterday and has tightened 7 to 12 bps," he said. "The Street is effectively saying, 'valuations on banks might be cut, but we are still bidding.'"

Demand for Turkish banks is solid, he said.

"Banks are still well supported," he said. "Their spreads are tighter by 7 to 10 bps."

Chinese developers in focus

Among the deals in the new issuance pipeline, those from the Chinese property sector are giving some market-watchers some pause.

On that list are the dollar notes planned by Beijing-based Longfor Properties Co. Ltd. via Morgan Stanley, Standard Chartered, Citigroup and HSBC.

The Rule 144A and Regulation S deal has been on a roadshow this week. Proceeds will be used to finance property projects and for general corporate purposes.

"There are just too many names from that sector," Padilla said. "But now it seems like what we're maybe seeing are more new companies out of that space that are probably not second- or third-tier, but higher tier that we haven't seen before. That could be good. But I'm not at all enthusiastic."

Housing prices continue to rise in China, and inflation remains a concern.

"And from a technical position, when you have supply that keeps coming it doesn't allow the bonds to trade well," she said. "You can't tighten if you know there are new issues coming in that will reprice all the credits."

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