Nogaholding sets terms on notes; Kazakhstan deal eyed as books close on tricky October

By Rebecca Melvin

New York, Oct. 31 – Bahrain’s Oil & Gas Holding Co. BSC set terms on $1 billion of notes in six- and 10-year tranches on Wednesday, which marked the last day of a volatile trading month for financial markets and shifting market focus to the yearend homestretch.

Nogaholding plans to price $500 million of 2024 notes to yield 7 5/8%, which was tightened from initial talk for yield in the 7 7/8% area, and $500 million of 2028 notes to yield 8 3/8%, which was tightened from initial talk for yield in the 8½% area.

The size of the order book when terms were set was $2.5 billion, with skew to the six-year tranche.

Also in the Middle East and Africa region, Islamic Development Bank set its spread for a €500 million five-year sukuk to yield mid-swaps plus 20 basis points, which was tightened from initial price guidance at mid-swaps plus 20 bps to 25 bps.

There were no new issues announced or priced for the Central & Eastern Europe region, a London-based market source said. Although Kazakhstan could price as early as Thursday after wrapping up roadshow meetings for a planned euro-denominated senior unsecured note. But because parts of Germany and France will observe All Saints’ Day on Thursday, the pricing could be pushed to Friday or next week.

“Given that it’s a euro deal, I guess they could wait a few more days,” the source said.

Latin America was also quiet, but in Asia Indonesia’s PT Pertamina (Persero) said it plans to sell a dollar-denominated, Rule 144A and Regulation S notes with 30-year duration.

Emerging markets debt remained heavy despite a rally in U.S. stock markets on Wednesday. Early strength in stocks faded into afternoon trading, and while indexes remained positive on the day, they are down sharply for the month. The S&P 500 stock index is down 7% for October.

Emerging markets debt held in reasonably well through the tricky trading, but a stronger dollar took a toll on spreads going into the Halloween holiday albeit on lowish volumes.

Emerging market credit performance has been under pressure since the breakdown of the synchronized global growth story and dollar strength earlier this year. But the repricing is not expected to give way to a systemic crisis according to BNP Paribas’ global markets commentary available online. It projects a weakening U.S. dollar in 2019 as supportive for emerging markets.

In addition to geopolitical developments including trade relations, politics has been a significant feature of 2018’s emerging markets credit market. There have been presidential elections in Colombia, Chile, Mexico, Malaysia, Turkey and Brazil. In South Africa, the electoral cycle could adversely affect land reform, mining policy and the budget.

Given the anticipated victory of the investor-friendly candidate Jair Bolsonaro in the Brazilian presidential election, Brazil’s bonds rallied for much of October. There are expected to be continued positive impacts on macro variables. Brazil’s growth should speed up to 3.0% from 1.5%, with inflation decelerating to 3.5% from 2018’s 4.0%, according to BNP Paribas.

Meanwhile, emerging markets high-yield debt is forecast to be negative by 8.5% for 2018, which is a reversal from 2017’s positive 9.5% return. Emerging markets investment-grade debt is expected to be negative by only 2.6% for the year. compared to a gain of the 7.3% for 2017, according to BNP Paribas.

© 2015 Prospect News.
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