Mumtalakat, Turkey sell notes; Russia, Ukraine remain in spotlight; ‘choppy’ for Petrobras

By Christine Van Dusen

Atlanta, Nov. 18 – Bahrain Mumtalakat Holding Co. BSC and Turkey sold notes on Tuesday during a better session for bonds from Central and emerging Europe, the Middle East and Asia.

Buyers were seen for front-end paper from Russian corporates, including OAO Rosneft’s 2017s and OAO Novatek’s 2016s, a London-based analyst said.

“Certain Russian sovereign bonds are also trading up, due to short squeezes,” he said.

This came as leaders from Ukraine and Russia argued over a possible cease-fire agreement and the European Union added more than 100 Ukrainian and Russian names to a blacklist.

“More important for investors, in our view, will be E.U. meetings in early December, where further economic sanctions on Russia will be discussed,” he said.

He believes there is “little appetite in the West for a large increase in the severity of sanctions, so would expect them to underwhelm,” he said.

Looking to Latin America, trading was “very choppy” for Brazil-based Petroleo Brasileiro SA as the company tried to weather a money-laundering and corruption scandal, a New York-based trader said.

The company’s 2021s managed to tighten as much as 25 basis points in early trading while the short end of the curve struggled, barely tightening, he said.

Petrobras’ 2019s fared the worst, with a high price and a weak spot in the curve, and widened a whopping 80 bps on Tuesday.

“It normally runs about 25 bps to 30 bps wide,” he said.

Sellers were seen for Brazil-based Vale SA’s most liquid bonds, with the 2022s, 2036s, 2039s and 2042s moving out about 12 bps.

From Mexico, the curve for Cemex SAB de CV was stable on Tuesday and drifted slightly lower amid scant selling, the New York trader said.

Turkey prints notes

Turkey priced a $1 billion issue of 4½% Islamic bonds to yield 4.48%, or mid-swaps plus 205 bps, a market source said.

The notes were talked at a spread in the 210 bps area.

CIMB, Citigroup and HSBC were the bookrunners for the Regulation S sukuk.

“Longer term, we expect the Turkish government to increase issuance of sukuks – they have been clear that this is an area of interest – which will benefit liquidity,” the analyst said.

Mumtalakat prices bonds

Bahrain’s Mumtalakat priced a $600 million issue of 4% Islamic bonds due Nov. 25, 2021 at 99.043 to yield mid-swaps plus 205 bps, a market source said.

The notes were talked at a spread in the 237.5 bps area.

BNP Paribas, Deutsche Bank, Mitsubishi UFG and Standard Chartered Bank were the bookrunners for the Regulation S deal.

Mumtalakat is a real estate company based in Bahrain.

“They don’t issue every year, it’s a sukuk, it’s a perfect tenor and it’s $600 million,” a trader said. “So in the [Gulf region] space, it really does tick a lot of boxes.”

FlyDubai sets talk

Dubai Aviation Corp. (FlyDubai) set talk in the mid-swaps plus 225 bps area for an issue of Islamic bonds due in five years, a market source said.

Credit Agricole CIB, Dubai Islamic Bank, Emirates NBD, HSBC, National Bank of Abu Dhabi, Noor Bank and Standard Chartered Bank are the bookrunners for the sukuk issue.

The issuer is a low-cost airline.

Dubai sees flows

In trading from the Middle East, high-yield names saw some “nibbling” while demand increased for banks from the region, a London-based trader said.

“Good flows in the Dubai complex, and still seeing net adding on Kuwait,” he said. “Bahrain was quieter, but we’re expecting some flows once Mumtalakat frees tomorrow morning.”

And buyers were spotted for long-dated bonds from Saudi Electricity Co., he said.

Shui On Land draws orders

China-based real estate company Shui On Land Ltd.’s new issue of $500 million 8.7% notes due 2017 drew a final order book of $2.6 billion from 152 accounts, a market source said.

The notes priced at par to yield 8.7% via BofA Merrill Lynch, BNP Paribas, Credit Suisse, Deutsche Bank and Standard Chartered in a Regulation S deal.

About 90% of the orders came from Asia and 10% from Europe, with banks picking up 62%, fund managers 35% and others 3%.

The notes were trading Tuesday morning at par bid.

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