TAQA notes get attention in trading on decent day for EM bonds; Russia's VEB delays deal

By Christine Van Dusen

Atlanta, Dec. 6 - Emerging markets bonds remained resilient on Tuesday even amid news that Standard & Poor's was looking at a potential downgrade for the euro zone bailout fund, following similar threats issued Monday night against countries like Germany and France.

"I've always wondered why anyone cares about ratings agencies anymore. Based on today's lack of reaction to the latest S&P moves in the euro zone, it seems the market agrees," a London-based trader said. "A few early attempts to move things lower have walked into the residual wall of demand from yesterday."

Particularly active on Tuesday were the recent notes from Abu Dhabi National Energy Co. PJSC (TAQA), which on Monday priced a $1.5 billion two-tranche issue of notes due 2017 and 2021.

"Relentless demand for the new TAQA deals is driving them 10 basis points tighter and creating good interest in the rest of high-end Middle East and North Africa assets," a trader said.

The Rule 144A and Regulation S deal included $750 million 4 1/8% notes due 2017 that priced at 99.502 to yield 4.233% and $750 million 5 7/8% notes due Dec. 13, 2021 that priced at 99.515 to yield 5.94%.

"It's another feeding frenzy with both tranches up a half-point on heavy demand from retail investors," the London trader said.

Said another trader, "While the backdrop continues to look decidedly jittery at best, the TAQA deal was a decent success with volume, activity and inquiry very heavy throughout the day."

TAQA sees good volumes

Very good buying interest was seen for the TAQA notes starting Tuesday morning, a trader said, particularly for the five-year deal.

"Having priced at 99.502 the bond quickly opened at 99.625 bid, 99.75 offered and traded up all the way to 100.25 before settling back to close at par, 100.10," he said. "Some very good volumes traded between that close level. Less inquiry was sighted on the 10-year deal here but it's still a decent effort."

After pricing at 99.515 the notes opened Tuesday at par, then reached 100.50 before fading to close at 100.10 bid, 100.20 offered.

"It's a solid effort, and as the deal statistics show, these deals were well placed and retail investors were the only buyers this morning looking to top up allocations," he said.

Middle East in focus

In other trading from the Middle East on Tuesday, Qatar saw sellers of its 2015s and buyers of its 2017s, a trader said.

"The long-dated 2042 is off the highs, closing at 103.5 bid, 104 offered," he said. "Names from Dubai were well offered after the headlines overnight from Moody's surrounding the debt situation in Dubai. It's not exactly something the market didn't already know."

Dubai Holdings, meanwhile, is planning to pay down its 2012 fixed-rate notes.

"This bond, understandably, traded higher in the market," he said.

Turkey widens

Also on Tuesday, Turkey's bonds were wider by 10 bps to 15 bps and some paper came out on Yapi Kredi.

"But retail investors are still nibbling on Akbank's 2015s in scrap amounts," a trader said. "Long-end sovereigns are the laggards, which are a point down, circa 10 bps wider."

Russia's corporate bonds were softer at the open.

"Apart from the usual games in Vimpelcom's 2022s, activity is muted," a trader said.

Another trader noted that the bonds were at first down at 87.50, then lifted, but were most recently seen down at 87.625.

Russia's quasi-sovereign bonds were a touch weaker on the day, he said, amid rumors of supply. "With the broader market weaker, the prospect of supply means this sector is being hit," he said.

VEB postpones issuance

Russia's VEB Finance plc was expected to price a dollar-denominated issue of benchmark-sized notes due December 2016 on Tuesday but has delayed issuance for undisclosed reasons, a market source said.

The issuer set price talk for the deal at the 5 5/8% area.

BNP Paribas, JPMorgan, Morgan Stanley and RBS are the bookrunners for the Rule 144A and Regulation S transaction.

The notes are guaranteed by Vnesheconombank, the Moscow-based Bank for Development and Foreign Affairs.

"They announced a new five-year at around 35 bps cheap to their curve," a trader said. "There was very limited selling being covered in London time. Yet the deal has been postponed."

Uruguay prices notes

In a new deal that came to the market on Monday, the Republic of Uruguay priced 19.906 billion pesos of 4 3/8% inflation-protected UI notes due Dec. 15, 2028 at par to yield 4 3/8%, according to a filing from the sovereign.

The notes are payable in dollars at the rate of 19.898 pesos per dollar.

Citigroup and HSBC were the bookrunners for the Securities and Exchange Commission-registered deal, which is part of a tender offer of bonds due 2018 for the new bonds.

Proceeds from the notes will be used to repurchase certain bonds in the tender offer and for general governmental purposes, including financial investment and the refinancing, repurchasing and retiring of domestic and external debt.

Tencent sells bonds

In another new deal from Monday, China-based online advertising and internet and mobile phone services holding company Tencent Holdings Ltd. priced a $600 million issue of 4 5/8% notes due Dec. 12, 2016 at 99.74 to yield Treasuries plus 375 bps, a market source said.

Goldman Sachs, Deutsche Bank, Credit Suisse and HSBC were the bookrunners for the Rule 144A and Regulation S notes, which include a change-of-control put at 101%.

The proceeds will be used for general corporate purposes, including working capital.

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