New deals from China Construction, Cuervo, Medco Energi; roadshows abound for EM issuers

By Christine Van Dusen

Atlanta, May 6 – China Construction Bank (Asia) Corp. Ltd., Mexico’s JB y Compania SA de CV (Cuervo) and Indonesia’s PT Medco Energi Global Pte. Ltd. were among the issuers to sell bonds on a mostly risk-off Wednesday for emerging markets assets.

Investors in Asian bonds were among the most risk-averse during the session, and that sent high-grade cash names wider by 1 basis point to 3 bps, a London-based trader said.

“The sell-off in United States Treasuries continued, but real-money demand – which we saw earlier this week – has slowed as primary supply came back to life,” he said. “We saw a bit of selling pressure in the recent issues, with Cnooc Ltd.’s 2025 trading down to the wides of 157 bps to close at 158 bps bid, 155 bps offered, or 4 bps wider.”

Financial companies from China closed the Asian session unchanged to 3 bps wider, he said.

“Korea is quiet,” he said. “India held in firm, with good demand in the short-end financials.”

Bonds from Philippines were “quite subdued,” he said, with the 2040s among the most active.

“Two-way around 105 to 105¼ over the day,” he said. “Mostly locals on the bid for this, and enough offshore banks selling to satisfy demand.”

In deal-related news, numerous issuers were on or planning roadshows, including Beijing-based Agricultural Bank of China Ltd., China’s Hsin Chong Construction Group Ltd., Indonesia, China’s Shanghai Electric Group Co. Ltd., China General Nuclear Power Corp., Poland’s mBank SA and Dubai’s DP World.

Better buyers seen

Client flows for many emerging markets bonds were skewed mostly to better buyers who on Wednesday were taking advantage of higher yields and lower cash prices, a trader said.

“Russia sovereign bonds are 1 bp to 5 bps tighter, and Turkey sovereign bonds are 1 bp to 4 bps tighter on the day, but under pressure from core rates selling off,” he said.

Taking a closer look at Turkey, the sovereign’s 2045s closed at 119.5 bps mid, down 1½ points, while Turkey’s 2036s were down ½ point at 96¾, another trader said.

“Spreads are marginally tighter,” he said.

Potential takeover

Toronto-based and Colombia-focused Pacific Rubiales Energy Corp. was on radar screens on Wednesday on the news that Alfa SAB and Harbour Energy Ltd. are looking to make a buyout offer.

“After a strong day, news hit the tape of exclusive discussions of a takeover attempt by Alfa for the remaining Pacific Rubiales shares it does not already own,” a trader said. “All four bonds traded up about 10 points on the day, with 90% of the gains coming after the announcement.”

The strong inquiries continued into Wednesday’s close, he said.

Petrobras, Vale tighten

In other trading from Latin America, names like Brazil’s Petroleo Brasileiro SA and Vale SA were “fighting the Treasury sell-off by tightening yet again,” a New York-based trader said.

Both names saw their bonds tighten an average of 5 bps to 10 bps, and Alfa’s bonds performed better than was expected as a result of the fact that the company won’t be assuming all of Pacific Rubiales’ debt in a takeover.

Meanwhile, high-grade names from Chile saw bids back up again, as did banks from Colombia, he said.

Middle East in Focus

Kuwait Energy’s bonds saw some action on Wednesday, another trader said.

“Plenty of semi-pro activity on Kuwait Energy’s 9½% 2019 dollar notes,” he said. “About 350 bps tighter on the month now. Brokers and snipers bidding up to 98 for bonds. Superb run, this one.”

Overall, bonds from the Middle East have seen lower cash prices, long-end volatility and diminishing liquidity as a result of the rising rates environment, he said.

“The steam appears to have run out on the perpetuals,” he said. “Long end-wise, Qatar and Saudi Electricity Co. both performed very well.”

CCB prints notes

In its new deal, Beijing-based China Construction Bank priced $2 billion 3.996% notes due in 2025 at 99.456 to yield Treasuries plus 242.5 bps, a market source said.

The notes were talked at a spread in the 245 bps area.

CCB International, HSBC, Citigroup and Standard Chartered Bank were the joint global coordinators. CCB International, HSBC, Citigroup, Standard Chartered Bank, JPMorgan, Credit Suisse, Deutsche Bank and ANZ were the joint bookrunners and joint lead managers for the Regulation S deal.

Issuance from Cuervo

Mexico’s Cuervo priced a $500 million issue of notes due in 2025 (expected ratings: /BBB/BBB) at 99.005 to yield 3.871%, or Treasuries plus 165 bps, a market source said.

The notes were talked at a spread in the 200 bps area.

BofA Merrill Lynch and Citigroup were the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used for general corporate purposes and to repay existing debt and accrued interest under a bridge loan incurred to finance the acquisition of Old Bushmill Distillery.

Medco Energi prices bonds

In another new deal, Jakarta-based oil company Medco Energi Global sold S$100 million 5.9% notes due May 14, 2018 at par to yield 5.9%, a market source said.

The notes were talked at a yield in the low-6% area.

DBS was the bookrunner for the Regulation S deal. ANZ and MUFG Securities were the other joint leads.

CNPC gives guidance

China National Petroleum Corp. set talk for a two-tranche issue of dollar-denominated notes due in five and 10 years, a market source said.

The five-year notes were talked at a spread of Treasuries plus 140 bps.

The 10-year notes were talked at a spread of Treasuries plus 165 bps to 170 bps.

Citigroup, Morgan Stanley, Credit Suisse, Goldman Sachs, HSBC and Standard Chartered Bank are the bookrunners for the Rule 144A and Regulation S deal.

The proceeds will be used for refinancing certain indebtedness, and for general corporate purposes.

CNPC is a government-owned oil and gas company based in Beijing.

Roadshow for Chinese bank

Beijing-based Agricultural Bank of China is on a roadshow this week in the United States for a possible issue of notes, a market source said.

Citigroup, ABC International, BofA Merrill Lynch and Wells Fargo Securities are leading the trip.

Other details were not immediately available on Wednesday.

Indonesia plans roadshow

Indonesia will depart on Friday for a roadshow to market a possible issue of notes, a market source said.

CIMB, Dubai Islamic Bank, HSBC and JPMorgan are the bookrunners for the Rule 144A and Regulation S deal.

The roadshow will be held in the Middle East, Asia and Europe.

“Indonesia opened soft again, trailing the overnight Treasury moves lower,” a trader said. “We saw a little client buying and a generally positive tone into lunch, which went quite soft as Europe came in, underperforming the Treasury moves a touch. Then, as rates capitulated lower, we had a mandate announcement.”

At that point, “Indonesian bonds just fell out of bed,” he said.

MBank to market notes

Lodz, Poland’s mBank will depart on May 11 for a roadshow to market a euro-denominated issue of notes, a market source said.

Commerzbank, Credit Suisse, HSBC and JPMorgan are the bookrunners for the possible deal.

The roadshow will begin on May 11 in London and travel to Zurich before concluding on May 12 in Frankfurt.

Shanghai Electric roadshow

China’s Shanghai Electric Group will hold a roadshow to market up to €600 million of offshore bonds that will be issued via Shanghai Electric Newage Co. Ltd., a market source said.

CCB International, Deutsche Bank and Morgan Stanley are the joint global coordinators for the Securities and Exchange Commission-registered deal. The banks are also the joint lead managers, along with Bank of China, Haitong International, Huatai Financial Holdings, Intesa Sanpaolo, JPMorgan and Societe Generale CIB.

The roadshow will begin Friday and take place in Europe.

Roadshow for Chinese corporate

China General Nuclear Power will set out on Thursday for a roadshow to market a possible dollar-denominated issue of notes, a market source said.

HSBC, ICBC, Bank of China, JPMorgan, ABC International and Societe Generale CIB are the bookrunners for the Regulation S deal.

The nuclear power plant company is based in Shenzhen, China.

DP World meets with investors

Dubai’s DP World will set out on Thursday for a roadshow to market a dollar-denominated issue of benchmark-sized notes, a market source said

Barclays, Citigroup, Deutsche Bank, Emirates NBD Capital, HSBC, National Bank of Abu Dhabi and Societe Generale CIB are the bookrunners for the Rule 144A and Regulation S deal.

“Good to see one of the best credits in the region coming to the market again,” a trader said. “DP World has not issued conventional bonds for many a year, so this one should be well received at the right tenor and level.”

Meetings for Hsin Chong

China’s Hsin Chong Construction Group is on a roadshow for a dollar-denominated issue of notes, a market source said.

UBS is the sole global coordinator and bookrunner for the Regulation S deal.

The investors meetings are being held in Singapore and Hong Kong.

The construction company is based in Hong Kong.

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