China's Avic, Cheung Kong, Brazil's Vale print bonds on active but short day for EM assets

By Christine Van Dusen

Atlanta, July 3 - A unit of Brazil's Vale SA and two issuers from China - Avic International Holdings and Cheung Kong Holdings - priced notes on a busy Tuesday for emerging markets assets, even as the trading session was cut short in advance of Wednesday's holiday in the United States.

"A very active day overall," a London-based trader said. "But we're not expecting much in the way of action tomorrow."

Risky assets were buoyed by the mostly positive results of the E.U. summit, according to a report from Barclays Capital.

"The post-E.U. summit rally may get a further boost from the European Central Bank on Thursday, as we expect a 50 basis points rate cut, versus consensus for a 25 bps cut," the report said. "But we believe further follow-through after the ECB decision will be difficult if activity data continue to soften and risks around the implementation of European Stability Mechanism-related measures escalate."

On Tuesday, the corporate-focused LUCI Crossover Index spread was 20 bps tighter.

"Ahead of the U.S. holiday tomorrow and with a favorable broader market backdrop, the market pushed once again higher and tighter," a trader said. "I must admit I am a little wary of markets that seem to just go up, however once again the technicals, spreads, upcoming holidays and Street inventory all seem to point to a supportive market."

Bonds from Middle Eastern issuers were favored on Tuesday, he said.

"I cannot stress how well Gulf region bank paper is trading," he said. "And it's virtually every bond, sukuk or conventional. It's getting very hard to replace inventory."

Vale unit sells notes

Vale Overseas Ltd., a unit of mining company Vale, priced a $750 million add-on to its existing 3¾% notes due 2023 at 99.608 to yield 3.798%, or mid-swaps plus 180 bps, a market source said.

BNP Paribas, Credit Agricole, HSBC and Natixis were the bookrunners for the Securities and Exchange Commission-registered deal.

The total book was more than €1.5 billion.

Chinese companies do deals

Hong Kong-based Avic International priced RMB 1.5 billion notes due 2015 to yield 4.8% after talking the notes at 4.85% to 5%, a market source said.

Development conglomerate Cheung Kong priced HK$1 billion perpetual notes to yield 5¼% via Deutsche Bank in a Regulation S deal.

Proceeds will be used for general funding purposes.

Bulgaria notes oversubscribed

On Monday the Republic of Bulgaria priced €950 million of 4¼% notes due 2017. The notes came to the market at 99.182 to yield 4.436%, or mid-swaps plus 320 bps, according to an announcement from the country's finance ministry.

The notes priced tighter than talk, set at mid-swaps plus 350 bps, via BNP Paribas, HSBC and Raiffeisen Bank in a Regulation S deal.

The order book totaled €6 billion, with 25% of the orders from the United Kingdom, 17% from Germany, 13% from Austria, 9% from Asia, 9% from U.S. offshore, 7% from Switzerland, 5% from France, 5% from Italy and 10% from others.

Fund managers accounted for 43%, banks 19%, insurance and pension funds 14%, hedge funds 12%, central banks 6% and others 6%.

The notes were quoted Tuesday at 100.45 bid, 100.60 offered.

Dubai lender gives guidance

In other deal-related news, Dubai's Emirates Islamic Bank gave initial price guidance of mid-swaps plus 330 bps for a benchmark-sized issue of dollar-denominated Islamic bonds due in 2018, a market source said.

Emirates NBD Capital, Credit Agricole, Dubai Islamic Bank, HSBC and Standard Chartered are the bookrunners for the lender's sukuk.

"Their last foray into the market was in January, coming with a five-year at mid-swaps plus 350 bps, which closes at z-spread plus 300 bps, bid side," a trader said. "So once again this looks in line. It's amazing how these deals appear in the market, all with a semblance of order this year."

Meanwhile, the issuer's 2022 sukuk was quoted at 107.50 on Tuesday.

"That's a 5.45% yield, versus the 6.45% coupon when it was issued at par," he said. "Impressive."

Paper for Al Futtaim, Bahrain

The recent $500 million issue of 5¼% notes due 2019 from Dubai's Majid Al Futtaim Holding LLC, which priced at par, was unchanged early Tuesday at 100.60 bid, 100.85 offered.

"It does feel like there's a little paper around on [Majid Al Futtaim] and Bahrain," a trader said.

The sovereign's $1.5 billion 6 1/8% notes due 2022 that recently priced at 99.867 received attention on Tuesday.

Then notes were trading at 100.55 bid, 100.75 offered.

The recent deal from Dubai's Jebel Ali Free Zone (Jafza) traded at 105.12 bid, 105.62 offered before it "hit a wall" at 105.50 on Tuesday, he said.

The $650 million 7% notes due 2019 priced at par on June 12.

Qatar well supported

In other trading from the Middle East, long-dated assets from Qatar were well supported, with the sovereign's 2042 bonds seen at 120.50 on the bid side.

"Qtel International's 2021s and 2025s were almost bid only," a trader said.

Dar al-Arkan's 2015 notes were quoted with a 106 handle.

"The back of the envelope sees $1 billion, hopefully, returned to the market on July 16, which will need to find a home," he said. "So the Dar al-Arkan 2015s, a $450 million issue, can still go higher."

International Petroleum Investment Co. (IPIC)'s notes stood out on Tuesday, particularly the issuer's 2026 and 2041 notes.

"Don't mess with the long end," he said.

Middle East in focus

As the central bank in Saudi Arabia planned mortgage financing rules to address the lack of lower-cost housing, Emaar Properties' 2016 notes benefitted.

"Granted, the 110 cash price is a hindrance to some, but it still offers a decent yield," a trader said.

Aldar Properties was also popular on Tuesday, with its bonds closing at 109.25 on the bid side.

"We also saw more demand on the long end of Dubai Water and Electricity Authority," he said. "The 2020s were printing at 111 in the Street. The bond opened the year at 103, so it's a pretty sound effort. Yet on spread, it still it looks interesting."

Saudi Electricity Co. remained "in vogue," a trader added, with its 2022s offering a 106 cash price handle.

Long-dated bonds in demand

In other trading on Tuesday, names from Eastern Europe and Russia stood out, a trader said.

"It's worth noting that they were off to the races today, especially on the long end," he said.

The new issue of $800 million 6.95% notes due 2042 from railway operator Kazakhstan Temir Zholy Finance BV traded up on Tuesday.

The notes, issued at par, were quoted at 104.

The recent issue of $1 billion 6.025% notes due 2022 from Russia's Vnesheconombank, which priced at par on June 27, was seen Tuesday at 101.84 bid, 102.04 offered.

Aleesia Forni contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.