Russia, Middle East fill pipeline while LatAm cools; Asia eyed; PDVSA details awaited

By Christine Van Dusen

Atlanta, Oct. 12 - While other emerging market regions took a bit of a post-holiday breather on Tuesday, Russia and the Middle East picked up the slack with at least 10 planned deals on a day marked by slightly better risk sentiment but thin volumes.

"There's a massive wave of new issuance at the moment," a London-based trader said. "There's plenty to keep people occupied."

The day started off with a somewhat "defensive" tone, he said, with "some good moves and people maybe taking a little bit of profit."

Credit default swaps were "well offered" at late morning, he said, and the JPMorgan Emerging Markets Bond Index Plus had widened by 5 basis points on Tuesday morning.

But by late afternoon - after the Federal Reserve released minutes from its most recent meeting that indicated an interest in bond buying to prop up the financial system - most emerging market credit default swaps tightened.

Brazil's five-year CDS were at 94 bps, the "tightest of the year," a New York trader said. And Argentina bonds were pushed up to "new recent highs."

The Fed's minutes "triggered a slightly more upbeat mood across global risk assets in New York afternoon trading," according to a report from RBC Capital Markets. "EM sovereign credit was by far the best performing EM asset, with the EMBI+ spread tightening 16 bps."

Argentina names outperform

Meanwhile, Latin American corporates "continue to run higher and tighter," the New York trader said.

And some are continuing to outperform, including Buenos Aires' 11¾% 2015 bonds, which priced on Sept. 27 at 99.076 to yield 12%. As of midday Tuesday, they were trading up at 1011/2.

"That's 2 points higher than the Thursday close," he said.

Making a "swift comeback," he said, were the 10 3/8% notes due 2020 from Argentina's Industrias Metalurgicas Pescarmona SAIC, which priced on Sept. 23 at 97.736 to yield 10¾%.

After "severely underperforming" at 96¼ on Oct. 4, the bonds were up at 99½ on Friday and were at 99¾ bid, 100¼ offered by midday on Tuesday.

Also outperforming on Tuesday were the Province of Cordoba's 12 3/8% notes due 2017, which priced in August at par. The notes were up at 1041/2.

All of this demonstrates that the market's "comfort level" with Argentina corporate credits has "risen exponentially over the last month," the New York trader said.

Russia in focus

In the primary market on Tuesday, the emphasis was on the upcoming deals from Russian and Middle Eastern issuers, a market source said.

"What we have out there, with live deals coming through the pipe, are mostly from that space right now," he said. "A large part of the focus, at least in the early part of this week and coming in after the holiday, is looking at overseas supply."

On this list is Moscow-based lender OAO Probusinessbank, which is on a roadshow this week for a planned offering of 5.5-year subordinated notes.

Also on a roadshow is Russia's Nomos-Bank for an issue of notes that is expected to total more than $300 million, according to a market source.

The marketing trip will take place in Hong Kong, Singapore, Switzerland and the United Kingdom.

And Russia-based maritime shipping company subsidiary SCF Capital Ltd. is on a roadshow via JPMorgan, Deutsche Bank and VTB Capital for a planned benchmark-sized issue of senior unsecured notes guaranteed by Sovcomflot JCF, a market source said.

New offerings emerge

Also from Russia, Moscow Credit Bank has tapped Commerzbank, RZB and ING for a possible eurobond issue that will be marketed to investors on a roadshow starting Thursday, a market source said.

The deal is expected to total $300 million. The marketing trip will be held in Europe and Asia.

Russia-based hydroelectricity company subsidiary RusHydro Finance Ltd. is planning an issue of ruble-denominated notes, a market source said.

Proceeds will be used for general corporate purposes and for capital expenditures, according to a Fitch Ratings report.

And state-owned diamond mining company Alrosa will embark on a roadshow beginning Oct. 19 for a $1 billion issue of notes, a market source said.

JPMorgan, UBS and VTB Capital are the bookrunners for the deal, which could price by the end of this month.

Also coming up soon, a source said, is the planned benchmark-sized notes due 2017 from Russia-based steel and mining company Severstal via Barclays, Goldman Sachs and RBS.

"They haven't defined anything more than that," a source said.

Middle East gets busy

The Middle East's uptick in activity includes a $1 billion sukuk issue planned by state-owned oil company Saudi Aramco with France's Total via bookrunners Credit Agricole, Deutsche Bank and Samba Financial, a market source said.

Proceeds will be used to finance the building of a crude oil refinery.

Also planning notes is Abu Dhabi Islamic Bank, which has mandated Barclays Capital, HSBC and Standard Chartered for a sukuk.

A roadshow for the Regulation S-only deal could begin as soon as next week.

And state-owned utility company Dubai Electricity & Water Authority is on a roadshow for a possible issue of notes via Citigroup, Credit Agricole, National Bank of Abu Dhabi, Standard Chartered and RBS, a market source said.

The marketing trip began Oct. 11 and will travel through London and New York before wrapping up in Boston.

Latin America slows down

The reason these two regions have heated up - and formerly blazing Latin America, meanwhile, has cooled off - has much to do with reporting periods, a market source said.

"Numbers are being updated and documentation is being printed," he said. "Russians and Eastern Europe march to a different drummer."

Latin America "had a very large amount of supply that really ended two weeks prior to the holiday weekend," he said. "We could see some potential trades coming through, though."

He pointed to the upcoming $150 million-minimum 9¾% notes due 2022 from Argentina-based electricity producer Empresa Distribuidora y Comercializadora Norte SA (Edenor), which are part of concurrent exchange and tender offers. Deutsche Bank, JPMorgan and Standard Bank are the bookrunners.

There's also talk that Buenos Aires may again tap debt markets and issue $500 million 10-year notes in 2011, a market source said.

And Venezuela-based oil company Petroleos de Venezuela SA, or PDVSA, is expected to issue a prospectus on Oct. 18 that will include details of its plans for a $3 billion issue of bonds due 2017. The dollar bonds can be bought with bolivars, a market source said. The company also will undertake a concurrent debt swap of its $3 billion 2011 bonds for a new 2013 bond.

"The talk of PDVSA doing the issue into local accounts may have held it back some," he said.

Still, any negative market reaction from the new supply is "very likely to be both light and short-lived, especially if the debt swap is successful," according to an RBC Capital Markets report. "Pricing will be key, though the fact that the new bond will be covered under international law and the possibility of an upfront premium should lift participation."

Asia deals coming

Asia could also pick up steam "over the next couple of weeks," the New York-based source said.

So far, China-based plantation company Sino-Forest Corp. has announced plans for a $500 million issue of senior notes due 2017.

The deal is on a roadshow this week with Bank of America Merrill Lynch and Credit Suisse.

Also from Asia, Thailand-based commercial lender Bangkok Bank PCL is planning a dollar-denominated offering of global senior unsecured notes, a market source said.

The deal could carry a maturity of up to 10 years.

In other news on Tuesday, market sources were whispering about possible issues from the Trade and Development Bank of Mongolia, Kazakhstan-based lender Kazkommertsbank and Kazakhstan-based oil exploration, development and production company Zhaikmunai.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.