Morning Commentary: Oil producers meet; Equate faces flooded market; Saudi Arabia’s notes active

By Christine Van Dusen

Atlanta, Oct. 28 – Oil producers met for technical meetings on a softer Friday morning for emerging markets assets as the new deal from Kuwait’s Equate Petrochemical Co. KSCC struggled somewhat in early trading.

“The [meeting] participants have noted that oil prices pared some of the gains after the surprise agreement in end-September,” a London-based analyst said. “Markets will therefore focus on whether non-OPEC producers are willing to join in output freezes or cuts. Doubts, however, have also emerged on whether OPEC will actually be able to reduce output to the targeted 32.5 million to 33 million barrels-per-day range.”

Meanwhile, the new issue of notes from Kuwait’s Equate Petrochemical – $2.25 billion senior notes in two tranches – grappled with a market already flooded with paper from Saudi Arabia’s mega-deal.

Equate on Thursday priced $1 billion 3% notes due 2022 at 98.364 to yield 3.338%, or mid-swaps plus 195 basis points. On Friday the notes were trading at 98.31 bid, 98.56 offered.

The $1.25 billion 4¼% notes due 2026 that priced at 98.781 to yield mid-swaps plus 270 bps traded Friday at 98.43 bid, 98.81 offered.

“The book build had some good momentum yesterday going by the updates, and allocations do not sound too lumpy, but I think all of the above points are leading to a disappointing opening for this debut issuer,” a London-based trader said. “Given the $2.25 billion issued, volumes look light – maybe a nod to the syndicates is due for ensuring bonds went to the right hands for once.”

Citigroup, HSBC, JPMorgan and NBK Capital were the global coordinators and joint bookrunners. Banca IMI, Mizuho Securities, MUFG and SMBC Nikko were also joint bookrunners.

Saudi Arabia’s notes active

The aforementioned deal from Saudi Arabia saw some activity in trading on Friday.

The new $5.5 billion 2 3/8% notes due in 2021 that priced at 99.007 to yield 2.588%, or Treasuries plus 135 bps traded at 99.70 bid, 99.77 offered on Friday.

The $5.5 billion 3¼% notes due in 2026 that priced at 98.679 to yield 3.407%, or Treasuries plus 165 bps, on Friday traded at 98.27 bid, 98.42 offered.

And the $6.5 billion 4½% notes due in 2046 that priced at 98.015 to yield 4.623%, or Treasuries plus 210 bps, traded at 98.35 bid, 98.60 offered on Friday.

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