Zhejiang Geely, 4finance sell notes; EM sees ‘tremendous volatility’; Romania seeks issue

By Christine Van Dusen

Atlanta, May 19 – China’s Zhejiang Geely Holding Group Co. Ltd. and Latvia’s 4finance Holding SA sold notes on Thursday as emerging markets assets experienced, as one trader put it, “tremendous volatility.”

“Tremendous volatility today in the emerging markets credit space, with aggressive early selling followed by a late-day bid,” he said. “We finish the day lower in cash bonds and wider in most spreads but well off our lows, as market pares losses throughout afternoon trading.”

Driving the volatility was the Federal Open Market Committee’s minutes from its April meeting, which raised the likelihood of a rate hike in June. This “served as a wake-up call, following recent comments by several Fed governors that markets were underestimating the probability of a rate hike as early as June,” a London-based strategist said. “In combination with lower oil prices, this has driven volatility.”

Brazil’s five-year credit default swaps spreads closed at 356 basis points from 346 bps after widening to 370 bps. Mexico’s finished the session at 178 bps from 176 bps after trading as wide as 188 bps earlier in the day.

“Lat-Am high yield finishes mixed on the day,” he said. “Venezuela’s curve continues to steepen, with front-end bonds outperforming.”

Meanwhile, PDVSA’s 2017s were unchanged at 64, and Argentina’s Bonar 2024s closed at 109.30 from 109.625.

The sovereign’s new 2026s moved to 102.375 from 103.30, he said.

“Early-morning flows saw better selling of all low-beta EM credit, but this tapered off,” he said. “The desk did not see buyers emerge when the market spiked back up later in the day.”

‘Lack of depth’

Overall, there is, in emerging markets debt, a “lack of market depth currently at play, and how pronounced a sell-off can get with few trades at all,” the strategist said.

“The recent downtrade in the EM credit space feels very similar to the uptrade, in that there are major gaps in prices with lots of surrounding confusion as to where the ‘real inside’ market should actually be,” he said.

Turkey eyed

Looking to Turkey, the ruling party on Thursday named Transport Minister Binali Yildirim as its candidate for prime minister. Yildirim is “considered to be loyal” to the President Erdogan, the strategist said.

“Risks run high that the new government might implement ‘unorthodox’ economic policies and pressure the central bank to lower rates more aggressively,” he said. “Turkey has certainly benefitted from a stronger-than-expected first quarter, but we consider the country as still susceptible to its external vulnerabilities.”

Mozambique could restructure

From Africa, Mozambique’s finance minister announced that the sovereign will not be able to pay $178 million of debt interest this month.

The sovereign is “currently in negotiations with lenders to restructure the debt,” the strategist said.

London cab company goes green

In its new deal, China’s Zhejiang Geely – via subsidiary LTC GB Ltd. – priced $400 million 2¾% green bonds due 2021, a market source said.

Societe Generale was the bookrunner for the deal.

The proceeds will be used to finance the development of a hybrid battery-powered version of the London Taxi Co.’s black cabs.

Zhejiang Geely is an automobile company based in Hangzhou, Zhejiang.

Issuance from 4finance

Latvia’s 4finance Holding priced €100 million 11¼% notes due May 23, 2021 at par to yield 11¼%, according to a company announcement.

Wallich & Matthes was the lead manager. Dero Bank AG was the co-lead manager. Pareto Securities was a co-manager.

The provider of short-term loans is based in Riga, Latvia.

Romania to issue notes

Romania is planning to issue euro-denominated notes due in 12 years, according to an announcement from the sovereign.

JPMorgan, Citigroup, RBI, Societe Generale CIB and UniCredit are the bookrunners for the Regulation S deal.

Kexim prices

On Wednesday, The Export-Import Bank of Korea (Kexim) priced a three-tranche issue of notes due in 2019 and 2026 in a Securities and Exchange Commission-registered deal, according to a company filing.

The deal included $1 billion 1¾% fixed-rate notes due May 26, 2019 that priced at 99.866.

The $500 million floating-rate notes due May 26, 2019 priced at par to yield Libor plus 70 bps.

And the $1 billion 2 5/8% fixed-rate notes due May 26, 2026 priced at 99.79.

BNP Paribas, BofA Merrill Lynch, Citigroup, Goldman Sachs, HSBC and Nomura were the bookrunners. Mirae Asset Daewoo was joint lead manager, and Kexim Asia was 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.

© 2015 Prospect News.
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