Azerbaijan's Socar, Philippines' Petron price; EM trading 'very active'; spreads tighten

By Christine Van Dusen

Atlanta, March 6 - The State Oil Co. of the Azerbaijan Republic (Socar) and Philippines-based Petron Corp. sold notes on a Wednesday that saw tighter spreads and yet another hectic session for emerging markets assets.

"Another very busy day with plenty of interest and activity," a London-based trader said, noting it was a "very active day, all told."

The Markit iTraxx SovX index spread narrowed 5.5 basis points to 173 bps over Treasuries. The corporate index, at a 225 bps spread on Tuesday, moved 3 bps tighter to 222 bps over Treasuries.

In trading, Russian corporates had a busy start on Wednesday, a London-based analyst said.

"Local buying this time," she said.

The curve for Russia's Sberbank moved 6 bps to 7 bps tighter while Novolipetsk Steel (NLMK) narrowed 12 bps and VimpelCom tightened as much as 13 bps.

While Latin American bonds also generated interest on Wednesday, investors were only attracted to a handful of names from the region, said a New York-based trader.

"The breadth of the market was thin, as we didn't see a broad range of credits trading in the Street," a New York-based trader said. "It remains concentrated."

Even paper from Mexico's Cemex was trading with less volume on Wednesday.

"Although it remains bid, in spite of two-way real-money inquiry," he said.

Bonds from Mexico's America Movil SAB de CV were sluggish, he said.

"Surprisingly, it did not widen again," he said.

In deal-related news, Dubai's Emirates airline mandated bookrunners for a dollar sukuk, and Dubai Islamic Bank's (DIB) upcoming issue of dollar perpetual notes was in focus on Wednesday.

"As long as both don't get too punchy with pricing and too big in issue size, in this market they should be quite well received," the London trader said.

Chavez death pummels PDVSA

Meanwhile a market source said that Venezuela's state-run oil monopoly, Petroleos de Venezuela SA, was an active trader, with literally "hundreds of millions" of dollars worth of its various bonds having traded following the not-unexpected announcement that longtime ruler Chavez had died after a lengthy battle with cancer.

He saw the Caracas-based entity's 8½% notes due 2017 trading at bid levels between 97½ and 981/2. He called that down about a point on the day, adding "and there was huge volume, really active today."

He said "they have about 10 issues, almost all down at least 2 or 2½ points, it looks like."

He pegged PDVSA's 9¾% bonds due 2035 at 97 bid, 98 offered going home, "down a couple of points," while its 9% notes due 2021 were finishing at 95 ¼ bid, 96 ¼ offered, down as much as 3 or 4 points.

Its 5 ¼% notes due 2017 were ending at bid levels between 86 ½ and 87 1/2. At a mid-point bid around 87, they were off by 1 point.

Socar, Petron sell notes

In its new deal, Azerbaijan's Socar priced $1 billion 10-year notes at par to yield 4¾%, or Treasuries plus 282.2 bps, a market source said.

Deutsche Bank was the bookrunner for the Regulation S deal.

And Philippines-based oil refiner and marketer Petron printed a $250 million increase of its 7½% perpetual notes at 104.25 to yield 6.551% via Deutsche Bank, HSBC, Standard Chartered Bank and UBS.

The Regulation S notes will be consolidated to form a single series with the $500 million notes that priced on Feb. 6 to yield 7½%.

The proceeds will be used to fund capital expenditures and for general corporate purposes.

Middle East in focus

Bonds from the Middle East were active on Wednesday, the London trader said.

The 2023 and 2028 notes from Qatar-based Qtel International saw action, and solid bids were reported for Dar al Arkan's 2015s.

"Active in Qtel again but mainly the lower dollar-priced assets," he said. The source was "seeing buyers of Qtel 2023 and 2028 and sellers aplenty in the 2043s, but no surprise, given the long bond move."

Qatar's front end "is a rock," a trader said, noting that the sovereign's 2015s were 60 bps tighter on the month.

ADIB still suffers

The perpetual notes from Abu Dhabi Islamic Bank - weighed down on Tuesday by DIB's perpetual mandate announcement - traded Wednesday at 105.125 mid, following Monday's level of 106 mid.

"ADIB's perpetuals close at 104.875 mid," a trader said. "This one has seen a pullback of over a point from Monday but is getting back to a level where it might be worth looking to add."

Abu Dhabi National Energy Co.'s (TAQA) tightened further, he said. And some small buying was seen for higher-yielding names like Aldar Properties.

Two-way activity for ADCB

The morning was also busy for Abu Dhabi Commercial Bank's recent notes, with two-way activity for both the new 2018s and 2023s.

The 2018s - which priced at 99.636 - moved to 99.35 bid, 99.55 offered before closing near 99.50.

"Very active between 99.40 and 99.60," a trader said, adding it was "liquid enough."

The 2023s that priced at 99.127 continued to fare better, trading at 100.65 bid, 100.85 offered, then ending the day at about 100.90.

Dubai hits a low

Early on Wednesday, Dubai's 2043s were unchanged on the week and the month at 96.37 bid, 97 offered, a trader said.

By the afternoon, the 2043s were at a fresh low, trading in the low-96s.

"Felt like a little bit of paper around in Dubai financials ahead of DIB supply," he said. "Good two-way on Dubai Holdings in the 99.80 to 100.30 context. Still looks OK."

African sovereigns catch bid

From Africa, the recent issue of notes from Tanzania - $600 million amortizing notes due 2020 that priced at par - were up 4 points in a week, a trader said.

"Plenty of the lagging African sovereigns have caught a bid of late," he said. "The backdrop has been solid and spreads have performed in EM, so this is no surprise."

Gabon traded with a 122 handle while Ghana was seen with a 116 handle.

"Zambia struggles a little, still at par to 100.50," he said. "Angola was trading at 109.25 bid, 108.75 offered last week. Now it's 110.75 on the bid side."

Meanwhile, the popularity of the dollar-denominated notes from Morocco paused on Wednesday, due to the Treasury move.

"Even Egypt feels like it has a sneaky bid," he said.

BBVA unhurt by downgrade

The downgrade of Brazil's BBVA SA by Moody's Investors Service pushed the bonds higher.

"Buyers are surfacing as the market looks at it as a positive, putting the downgrade in the rearview mirror and moving on and up," the New York trader said.

Bonds from Brazil's OGX Petroleo & Gas Participacoes SA moved down to a near-low.

"We saw Street sellers lightly emerge on Marfrig Alimentos SA paper as bonds are up another point this week, causing the Street to lighten up," he said. "But recent strong bids remain."

Ukraine sees buyers

From Ukraine, buyers have emerged during the week, pushing the long end of the sovereign curve up 1 point, said Svitlana Rusakova of Dragon Capital.

"Corporates were initially only marked higher but then were lifted as well in a few cases," she said.

Meanwhile, Poland-based energy company Energa tapped BofA Merrill Lynch, BNP Paribas and HSBC for a roadshow to market an issue of euro-denominated notes, a market source said.

The marketing trip for the Regulation S transaction will begin March 11.

Emirates taps bookrunners

For its upcoming deal, Dubai's Emirates airline has mandated Citigroup, Standard Chartered Bank, Abu Dhabi Commercial Bank, Dubai Islamic Bank and Emirates NBD for a dollar-denominated issue of Islamic bonds, a market source said.

No other details were immediately available on Wednesday.

Cosan, Tanner give guidance

Brazil-based bioethanol producer Cosan SA has set talk in the 5½% area for a 10-year issue of dollar notes, a market source said.

Bradesco BBI, BTG Pactual, Itau BBA and Morgan Stanley are the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used to prepay debt.

And Chile-based financial services company Tanner Finanzas Corporativas has set price talk at the 4½% area for an upcoming issue of $300 million notes due in five years via BofA Merrill Lynch.

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