EM finishes week on solid ground; Turkey tap, Kipco issue in focus; Agrokor could rebound

By Christine Van Dusen

Atlanta, Feb. 17 – Emerging markets assets ended the week on strong footing on Friday, with investors taking particular interest in Turkey’s tap and the new issue from Kuwait Projects Co. SPC Ltd. (Kipco).

Turkey’s new issue came to the market on Thursday at 102.639 and traded Friday at 102.80 bid, 103 offered on Friday, a syndicate source said.

The notes priced at a yield of 5.65%, or Treasuries plus 320.5 basis points, following talk in the 5.85% area.

“This compared to a bid yield of 5.55% pre-issuance and therefore attracted an order book four times larger than the issuance size,” he said.

The original $2 billion issue priced in January at 98.858 to yield 6.15%, or Treasuries plus 375.7 bps. Those notes were initially talked in the 6.2% area.

“The initial issuance in mid-January saw a strong recovery in the Turkish sovereign, circa 55 bps tighter, but even more in banks’ bonds, circa 90 bps tighter on average over the last month,” he said. “The sovereign’s success in raising funds in the market alleviates concerns on refinancing risks in Turkey, with the majority of larger banks having redemptions this year.”

The sovereign’s tap “could be a door opener for Turkish banks, despite some reluctance to issue ahead of the referendum which has been scheduled for April 16,” he said.

The proceeds from the deal will be used for general financing purposes.

“In total, the Turkish sovereign intends to raise $6 billion from international capital markets for the year,” he said.

The Turkish tap drew a total of $4.6 billion from 210 orders, another syndicate source said.

About 45% came from the United Kingdom, 21% from the United States, 18% from Turkey, 15% from other Europe and 1% from other countries.

Kipco ticks higher

Meanwhile, the new issue of notes from Kipco – $500 million 4½% notes due 2027 that priced Thursday at par – traded Friday at 100½ bid, 100 5/8 offered, a trader said.

Price talk was revised to 4¾% after initial talk of 4 7/8%.

Citigroup, HSBC, Kamco and JPMorgan were the bookrunners for the Regulation S deal.

Proceeds will be used to fund a tender offer for the issuer’s $500 million 4.8% notes due 2019 in order to extend the company’s debt maturity profile.

The issuer is a Kuwait City-based public investment holding company for a diverse group of businesses.

Agrokor eyed

Investors were also watching Croatia-based Agrokor Group, which recently saw its bonds plummet after a Russian official said the nation might not help the Croatian company refinance its loans.

On Wednesday, the Russian ambassador seemed to switch gears, saying that Russia is willing to working with all Croatian companies, including Agrokor, that are willing to develop trade and economic ties with Russia.

Now the company is considering the sale of some of its biggest assets “to shore up investor confidence before plans to reorganize debt,” according to a report from Schildershoven Finance BV. “Rumors over the possible assets sale by Agrokor will be positively assessed by investors and may cause a strong eurobond price rebound, as it may be the only way to restore the company’s credit health.”

Severstal sells bonds

On Thursday, Russia’s OAO Severstal priced $500 million notes due in 2022 at a yield of 3.85%, a market source said.

Citigroup, ING, JPMorgan and Societe Generale CIB were the bookrunners for the deal.

Other details were not immediately available on Friday.

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