Turkey issue flat to lower; Brazil’s Klabin sets roadshow; Mexico City Airport bonds up

By Rebecca Melvin

New York, Nov. 8 – The Republic of Turkey’s newly priced 5.2% notes due 2026 slipped on Thursday after the sovereign priced €1.5 billion of the paper tight to initial talk.

The Turkey 2026 notes were seen at 99.32 bid, 99.48 offered after the deal priced on Wednesday at a reoffered 99.73. The bond was also quoted at 99¼ bid, 99¾ offered.

The large deal size was likely the cause for the issue struggling a bit, a market source said.

There was no other primary market activity in the Central & Emerging Europe, Middle East and Africa region. But in Latin America, Brazil’s Klabin SA announced that is has selected banks and scheduled fixed-income investor meetings for a dollar-denominated notes offering that could price as early as next week, market sources said.

Bank of America, Bradesco, HSBC, Itau and Morgan Stanley are the banks arranging meetings to be held through Nov. 13, with a Rule 144A and Regulation S deal following possibly as soon as Wednesday, a market source noted.

Klabin is a Sao Paulo-based pulp, paper and paper products company.

In secondary market dealings, Mexico City Airport notes bounced off lows notched last week as investors responded favorably to meetings with the incoming administration of Mexico’s president-elect Andres Manuel Lopez Obrador. The bonds sank last week on news that the new government is canceling the airport project.

The Mexico City Airport 5½% bonds due 2047 were at 78.80, which was up 0.55 point, or 0.7% from the previous close. The notes took a dive last week from about 88.

The $3 billion issue priced September 2017 along with a $1 billion tranche of 5½% notes due 2046.

There are also two nearer dated Mexico City Airport bonds. The 4¼% notes due 2026 were at 84.95 bid, 85.50 offered last after touching a low of 81.10 last week, and the 3 7/8% notes due 2028 are at 81.50, which is up 0.88 point, or 1.1%, on the day.

Market players were watching global oil prices continue to deteriorate as the U.S. Federal Reserve concluded its regularly scheduled policy meeting standing pat on rates but pointing to the strength of the U.S. economy. The stress on strength sent a signal to observers that an interest rate increase is likely next month for the Fed’s final policy meeting of the year.

U.S. oil prices extended losses and entered bear market territory, which is generally defined as a drop of 20% from its last market high, amid oversupply concerns and waning demand.

The price for light, sweet crude for December delivery fell about $1.00 to $60.67 a barrel on the New York Mercantile Exchange, which was down 1.6% on the day.

Brent crude fell 2% to $70.65 a barrel.

Meanwhile Argentina was in the cross hairs after Fitch Ratings said it revised its outlooks on several corporations in Argentina following the outlook revision of the sovereign’s rating outlook.

The companies with negative outlook include AES Argentina Generacion SA, Agua y Saneamientos Argentinos SA, Arcor SAIC, Capex SA, Compania General de Combustibles SA, Genneia SA, IRSA Propiedades Comerciales SA, Mastellone Hermanos Sociedad Anonima, Pampa Energia SA, Petroquimica Comodoro Rivadavia SA, Telecom Argentina SA and YPF SA.

The rating agency said Argentina has seen a drop in economic activity and has uncertain prospects for multi-year fiscal consolidation and market financing availability as International Monetary Fund funds are used up, which adds risk to sovereign debt sustainability.

Fitch said that it assumes the government will achieve the fiscal adjustment targeted in 2019 in the budget and that the recently renegotiated IMF program will help it fully cover its financing needs. But, “downside risks persist amid a nascent economic recession and election cycle.”

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