Hyundai’s dual tranches eyed; Tunisia spreads wider after ratings downgrade; Egypt flat

By Rebecca Melvin

New York, Aug. 21 – In the absence of much new issuance from other regions, emerging market players eyed a couple of announced deals from Asia including Hyundai Capital Services Inc.’s investment-grade dual-tranche notes, which were talked at 155 basis points over Treasuries for the five-year notes and 170 bps over Treasures for the 10-year notes.

The dollar-denominated, Rule 144A and Regulation S notes were being sold via bookrunners BofA Merrill Lynch, BNP Paribas Securities Corp., Citigroup Global Markets Inc., DBS Bank Ltd. and MUFG.

Hyundai Capital Services is a Seoul, South Korea-based unit of the Hyundai Motor Co.

Also in Asia, Vardhman Textiles Ltd. said it was planning to price Rs. 5 billion of debentures.

The primary market was silent for the Central & Eastern Europe, Middle East and Africa region as the slow summer season continued. Some market players were looking ahead to potential issuance next week following the U.K. bank holiday on Monday.

Back in established issues, spreads widened on Tunisia bonds on Monday after a Moody’s Investors Service rating downgrade, but the spreads of Azerbaijan and Egypt were little changed after Moody’s downgraded the first and affirmed its rating on the second, said a trader covering the CEEMEA region.

Tunisia’s bonds were about 12 bps to 14 bps wider after Moody’s downgraded the long-term issuer rating of the government to B1 from Ba3 and maintained a negative outlook. The Friday downgrade cited continued structural deterioration of fiscal strength, external imbalances and reduced institutional strength and government effectiveness amid delays of IMF-agreed reforms.

The agency also downgraded the foreign currency debt rating of the Central Bank of Tunisia to B1 from Ba3 and the shelf/medium-term note rating to provisional B1 from provisional Ba3.

Azerbaijan’s 2024 notes were little changed at 101½ bid, 102¼ offered after the rating agency cut that sovereign’s rating to Ba2 from Ba1, citing increased government debt among other things.

Egypt’s debt was little changed to slightly tighter after the country was affirmed by Moody’s at B3 with a stable outlook. The rating agency noted that government finances are still weak, but it recognized “impressive” reform progress. Visibility is limited by uncertainty around the country’s May 2018 presidential elections.

Overall, the emerging market was mostly quiet without much movement in spreads as a wait and see approach settled in given ongoing geopolitical tensions.

The U.S. and South Korean military forces have started military drills that will continue until Aug. 31. The maneuvers were said to be similar to last year’s exercises, but they are not as large as those the allies usually conduct in the spring. Pyongang has reacted negatively to the drills in the past and may react strongly if strategic assets such as an aircraft carrier or B-1B bombers are deployed.

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