Cemex, VTB join list of new EM deals getting action on shorter, busy Friday for EM assets

By Christine Van Dusen

Atlanta, Oct. 5 - Recent new deals from emerging markets issuers ruled on a Friday that also saw new notes from Mexico's Cemex Finance LLC and Russia's VTB Capital SA.

"Net-net, it's a busy Friday dominated by the new issues," a London-based trader said.

VTB, as well as the $750 million 5.9% notes due 2022 that Russia's OAO Severstal priced on Thursday, got the most attention in the secondary market.

"This basically rendered the morning to attempting to satisfy the retail inquiry on both deals, although granted it was skewed more towards the VTB deal," he said.

Some small interest also was noted for Zambia-focused First Quantum Materials Ltd.'s new $350 million issue of seven-year notes that priced at par to yield 7¼%.

The notes were seen trading up on Friday, a trader said.

Otherwise, the market was somewhat quiet, given Friday's early close in the United States and the upcoming Columbus Day holiday.

"US holiday Monday, so liquidity will obviously be poor," a trader said.

In its new deal, building materials supplier and cement producer Cemex priced a $1.5 billion offering of 9 3/8% notes due Oct. 12, 2022 at par to yield 9 3/8%.

JPMorgan, Barclays, RBS, Credit Agricole, HSBC and ING were the bookrunners for the Rule 144A and Regulation S deal.

And the $1.5 billion issue of 6.95% notes due Oct. 17, 2022 from VTB came to the market at par to yield 6.95%, or Treasuries plus 527.7 basis points.

The notes priced tighter than talk, set at the 7¼% area.

Barclays, Bank of America Merrill Lynch, Societe Generale and VTB were the bookrunners for the Rule 144A and Regulation S deal.

Proceeds from the deal - which was more than five times oversubscribed - will be used to further strengthen VTB's capital base, according to a company announcement.

Severstal oversubscribed

The final book for Severstal's new 5.9% notes was $4.5 billion from more than 250 investors, a market source said.

About 48% of the orders came from the United States, 19% from the United Kingdom, 11% from Switzerland, 10% from Europe, 5% from Asia, 3% from Russia and 4% from others.

Asset managers picked up 66%, bank and private banks 23%, hedge funds 10% and insurance and pension funds 1%.

Citigroup, ING, JPMorgan and VTB were bookrunners for the Rule 144A and Regulation S deal.

Telefonica Chile does deal

Market-watchers were also interested in the new $500 million issue of 3 7/8% notes due Oct. 12, 2022 from Telefonica Moviles Chile SA, which priced late Thursday 99.901 to yield 3.887%, or Treasuries plus 225 bps via BBVA, Citigroup and JPMorgan in a Rule 144A and Regulation S deal.

In other deal-related news, real estate developer Sunac China Holdings Ltd. mandated Deutsche Bank, Bank of America Merrill Lynch, Citigroup, Morgan Stanley and UBS as bookrunners for a dollar-denominated issue of notes that will be marketed during a roadshow, a market source said.

The marketing trip for the Regulation S deal will begin Oct. 8.

Qatar International taps leads

Qatar International Islamic Bank tapped HSBC, QNB Capital and Standard Chartered Bank for a dollar-denominated issue of Islamic bonds that will be marketed during a roadshow starting Sunday, a market source said.

The Regulation S deal's roadshow will be held in the Middle East, Asia and Europe.

And Mexican auto parts company Sanluis Rassini SA de CV canceled plans for a $250 million issue of 10-year notes due to market conditions, a market source said.

The company mandated Bank of America Merrill Lynch and JPMorgan for the Rule 144A and Regulation S deal, which was marketed during a roadshow that ended Oct. 1.

Proceeds were to be used to refinance debt and for general corporate purposes.

PDVSA bonds rally

Also from Latin America, Petroleos de Venezuela SA (PDVSA) was in focus on Friday as new polls showed current Venezuelan president Hugo Chavez might lose.

A trader saw the company's 8½% notes due 2017 move up a point to 90¾ and the 5 3/8% notes due 2027 a point better at 631/4.

Both the 9¾% notes due 2035 and the 5½% notes due 2037 inched up three-quarters of a point to 85 5/8 and 621/4, respectively.

Up 1 3/8 points were the 5½% notes due 2017, which ended around 791/2. And the 9% notes due 2021 rose 1¾ points to 851/2.

"An opposition victory looks likely," Barclays analysts Alejandro Arreaza and Alejandro Grisanti wrote in a research note published Friday. "An opposition victory could be a positive surprise for the market that could push Venezuelan assets to levels not seen in the past five years."

Barclays recommended investors buy the bonds now.

Africa in focus

South Africa's credit default swaps traded Friday at 157 bid, 162 offered amid more strikes at the nation's mines. The country's currency was near a 31/2-year low and bonds were heavy, a trader said.

"Investec's 2017s were lower, given South Africa's moves," he said. "They're at 98 1/8 bid, 98 7/8 offered now."

Meanwhile, notes from Zambia traded up a few times while Senegal saw a buyer late in the day.

"Gulf region-wise, there's obvious spread tightening with the 10-year Treasuries now at 1.72% and the majority of bonds there are holding in pretty well," he said. "Certainly not a vast amount of volume going through today, but this is to be expected, given that it's Friday."

Middle Eastern lenders gain

In other trading, the recent issues from Abu Dhabi-based First Gulf Bank PJSC and Qatar Islamic Bank SAQ saw some action on Friday.

First Gulf Bank's $650 million issue of 2.862% notes due 2017 priced at par and were seen at 100.25 bid, 100.35 early in the session.

"The recent [First Gulf Bank] 2017s last printed at 100.30," a trader said.

Qatar Islamic Bank's $750 million 2½% bonds due 2017 were trading Friday at 100.20 bid, 100.30 offered.

"[Qatar Islamic Bank]'s 2017 trades still a little heavy, closing at 100.15 bid, 100.25 offered," he said.

Ukraine stays weak

From Ukraine, trading activity remained somewhat weak, according to Svitlana Rusakova of Dragon Capital.

"The small number of trades didn't result in any significant price moves and there was no reaction to changes in global risk sentiment," she said.

The sovereign's 2020s were seen stabilizing at 99.50 bid, 100.50 offered, while the 2021s were quoted at 100.50 bid, 101.50 offered.

Some action was noted for Ukreximbank's 2015s, which were quoted at 96.25 bid, 98.25 offered.

"Other corporate names were relatively inactive," she said.

Bond fund inflows continue

Third-quarter net inflows for emerging markets bonds touched $14.89 billion, according to a report from data-tracker EPFR Global.

"A quarter that began with a euro zone-induced whimper ended with something of a bang as the US Federal Reserve and European Central Bank pulled the trigger on long-anticipated quantitative easing programs," EPFR said. "The third week of September saw flows into all EPFR Global-tracked equity funds hit a more than four year high. That was not enough to stop bond funds, which are currently on course to break their full year inflow record set in 2010."

Emerging markets bond funds have seen flows of $38.89 billion for the year-to-date. For the first nine months of 2011, the funds reported inflows of $18.42 billion.

"Yield remained the key driver for fixed income flows between July and September, with investors gravitating to fund groups associated with better-than-average returns," the report said. "Funds with hard currency mandates again dominated flows into emerging market bond funds, although their local currency counterparts fared better as the quarter progressed."

Stephanie N. Rotondo contributed to this article.

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