Primary hosts Hipotecario, Pemex, Ceske Drahy; FOMC notes send Lat-Am wider; Kallpa on deck

By Christine Van Dusen

Atlanta, May 18 – Argentina’s Banco Hipotecario SA, Mexico’s Petroleos Mexicanos (Pemex) and Czech Republic’s Ceske Drahy AS sold notes on a challenging Wednesday for emerging markets assets, which saw spreads widen as the Federal Open Market Committee released minutes that indicated a rate hike could come as soon as June.

“The primary market remains very active,” a market source said.

Prior to the release of the minutes, the markets had priced in the probability of a 25-basis points rate hike at 12% for June and 28% for July,” a London-based strategist said, before the minutes were released. “While this appears to be low, the numbers have materially increased versus a week ago.”

Latin American bonds dropped on Wednesday in response, a New York-based trader said.

Brazil’s five-year credit default swaps spreads finished the day at 346 bps from 333 bps, while Mexico’s moved to 176 bps from 170 bps.

“Cash prices get hammered as the U.S. Treasury selloff and spread widening proves too much,” he said. “Lat-Am high yield finishes mixed on the session.”

Venezuela’s 2027s were down at 42.50 from 43, PDVSA’s 2017s finished at 64 from 63, and Argentina’s Bonar 2024s closed at 109.625 from 110.

The sovereign’s 2026s, meanwhile, closed at 103.30 from 104.30.

“Flows today were two-way [before the FOMC release], but better sellers came in aggressively after the hawkish minutes were released,” he said. “The Fed has been bolstering global risk assets, and today showed that any talk of imminent rate hikes will have markets repricing quickly.”

In deal-related news, Middle Eastern issuers are expected to continue bringing new deals.

“The low oil price environment has also driven [Gulf region] sovereigns to international debt markets,” he said, pointing to a possible issue of dollar-denominated notes from Kuwait in the third quarter.

Market sources were also whispering about potential deals from Noor Bank and EA Partners.

South Africa eyed

Also on Wednesday, some investors were eyeing South Africa, where the country’s finance minister could be arrested on espionage charges. Still, even with this tumultuous backdrop, Moody’s Investors Service affirmed the sovereign rating at Baa2, following a review for a downgrade.

“A key driver for the affirmation was the strength of the Republic’s institutions,” the strategist said. “While we do not expect [the finance minister] to be replaced, headline risk or an increased probability of such scenario would be substantially detrimental for South Africa.”

Ukraine dips

Looking to Ukraine, sovereign bonds have moved lower so far this week, though “two-way interest we saw suggested that supply was being gradually taken out,” said Fyodor Bagnenko, a fixed-income trader with Dragon Capital.

“Corporates remained a bright spot,” he said.

Hipotecario prints tap

In its new deal, Argentina’s Hipotecario priced a $150 million tap of its 9¾% notes due Nov. 30, 2020 at 106.525 to yield 8%, a market source said.

The notes were talked at a yield in the low-8% area.

BofA Merrill Lynch and Itau were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used for working capital.

Hipotecario is a Buenos Aires-based commercial bank.

Pemex prices bonds

Mexico’s Pemex priced a two-tranche issue of CHF 375 million notes due June 14, 2018 and Dec. 14, 2021, a market source said.

The deal included CHF 225 million 1½% notes due 2018 that priced at 100.211 to yield 1.392%, or mid-swaps plus 210 bps.

The CHF 150 million 2 3/8% notes due 2021 priced at 100.550 to yield 2.269%, or mid-swaps plus 280 bps.

Credit Suisse and UBS were the bookrunners for the deal.

Pemex is a Mexico City-based petroleum company.

Issuance from Ceske Drahy

Czech Republic’s Ceske Drahy sold €400 million notes due in 2023 at 99.024, a market source said.

Citigroup was the bookrunner for the Regulation S deal.

Other details were not immediately available on Wednesday.

The issuer is a Prague-based rail operator.

Kallpa gives guidance

Peru’s Kallpa Generacion SA set talk in the Treasuries plus low-to-mid-300 bps area for a $350 million issue of 10-year notes (expected ratings: Baa3//BBB-), a market source said.

Credit Suisse, Credicorp, Morgan Stanley and Scotiabank are the bookrunners for the Rule 144A and Regulation S deal.

The notes will include a change-of-control put at 101 and a make-whole par call prior to maturity.

The proceeds will be used to repay existing indebtedness and for general corporate purposes.

Pricing is expected to take place on Thursday.

The issuer is a Lima-based subsidiary of Israeli power generator IC Power Ltd.

Turkey to host roadshow

Turkey is planning to hold a roadshow during the first half of this year for an issue of Islamic bonds, a market source said.

Other details were not immediately available on Wednesday.

Qatar plans investor call

Qatar will hold an investor call on Friday for its upcoming issue of dollar-denominated and benchmark-sized notes, a market source said.

A roadshow begins Thursday and will be held in Asia, Europe and the United States.

HSBC, JPMorgan, MUFG and QNB Capital are the joint global coordinators and – along with al khaliji, Barclays, BofA Merrill Lynch, Deutsche Bank, Mizuho Securities and SMBC Nikko – the joint lead managers and joint bookrunners for the Rule 144A and Regulation S deal.

Kexim to print dollar notes

The Export-Import Bank of Korea (Kexim) is looking to issue two tranches of fixed-rate notes and one tranche of floating-rate notes, with all denominated in dollars, according to a company filing.

BNP Paribas, BofA Merrill Lynch, Citigroup, Goldman Sachs, HSBC and Nomura are the bookrunners for the Securities and Exchange Commission-registered deal. Mirae Asset Daewoo is joint lead manager, and KEXIM Asia is co-manager.

The proceeds will be used for general operations, including extending foreign currency loans and repaying debt.

Kexim is based in Seoul, South Korea.

Petrobras releases details

Brazil-based Petroleo Brasileiro SA’s (Petrobras) wholly owned subsidiary, Petrobras Global Finance BV, released details on its two-tranche issue of $6.75 billion notes due May 23, 2021 and 2026.

The $5 billion 8 3/8% notes due in 2021 priced at 99.002 to yield 8 5/8%, or Treasuries plus 732.5 bps, following talk in the 9% area.

The $1.75 billion 8¾% notes due in 2026 priced at 98.374 to yield 9%, or Treasuries plus 722.6 bps, following talk in the 9¼% area.

BB Securities, BofA Merrill Lynch, JPMorgan and Santander were the bookrunners for the Securities and Exchange Commission-registered deal.

Petrobras is an energy company based in Rio de Janeiro.

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