Emerging Markets: Philippines, Brazil, Turkey prices notes; Tata Motors taps market; Vakiflar launches

By Rebecca Melvin

New York, Dec. 4 – The republics of the Philippines, Turkey and Brazil each priced $2 billion-plus of notes this past week.

Both the Philippines and Brazil priced dual tranches, totaling $2.75 billion and $2.5 billion, respectively. Turkey priced $2.25 billion in a single tranche of 10-year notes.

A variety of new corporate issuance also hit the tape in emerging markets credit this past week, as the final month of 2020 and countdown to year-end got underway.

Corporate issuers hailed from different regions and included India’s Tata Motors Ltd., which priced $300 million 5½% notes due 2024; South Africa-focused Prosus NV, which sold $1.5 billion of 3.832% notes due 2051; Mexico-focused FEL Energy VI Sarl, which sold $953 million of 5¾% notes due 2040; and Istanbul Metropolitan Municipality, which sold $580 million of 6 3/8% five-year notes.

Also from Turkey, Turkiye Vakiflar Bankasi TAO (Vakifbank) launched $750 million five-year sustainable bonds (expected ratings: B2//B+) to yield 6 5/8%, and Estonia-based Arco Vara AS plans to issue €1.5 million of 10% two-year unsecured bonds in a private offering.

Bond funds tracked by EPFR attracted more inflows this past week than equity funds for the first time in a month, with the year-to-date total surpassing $380 billion, according to the Dec. 4 EPFR Global Navigator.

Risk appetite improved amid optimism about effective vaccines to combat the Covid-19 coronavirus pandemic, the Navigator said. Local currency emerging markets bond funds attracted more money than hard currency funds for a fourth straight week, helped by the growing appetite for exposure to Chinese debt, which offers positive yields in an appreciating currency. China bond funds have now recorded inflows for 31 straight weeks and absorbed $11.6 billion since the beginning of June, according to EPFR.

Overall, emerging markets bonds recorded their 21st inflow in the past 22 weeks with funds dedicated to sovereign debt attracting three times the amount of fresh money to their corporate counterparts.

Sovereigns tap $7.5 billion

Philippines issued $2.75 billion of senior notes in two tranches (Baa2/BBB+/BBB), according to FWP filings with the Securities and Exchange Commission. The republic sold $1.25 billion of 1.648% non-callable senior global bonds due June 10, 2031 at par to yield Treasuries plus 70 basis points, and $1.5 billion of 2.65% senior bonds due Dec. 10, 2045 was sold at par with a yield of Treasuries plus 94.3 bps.

The republic plans to apply for listing on the Luxembourg Stock Exchange and trading on the Euro MTF Market.

Brazil priced $2.5 billion of additional 2 7/8% global bonds due 2025, 3 7/8% global bonds due 2030 and 4¾% global bonds due 2050, according to an FWP filing with the Securities and Exchange Commission.

Specifically, Brazil priced $500 million of additional 2025 bonds at 102.873 to yield 2.2%, $1.25 billion of additional 2030 bonds at 103.421 to yield 3.45% and $750 million of additional 2050 bonds at 103.995 to yield 4.502%.

The new 2025 bonds form a single series with the existing $1.25 billion of 2025 bonds issued on June 10; the new 2030 bonds are an add-on to the $2.25 billion of 2030 bonds issued on June 10; and the new 2050 bonds are a further issuance of the $2.5 billion of 2050 bonds issued on Nov. 14, 2019.

Turkey priced $2.25 billion of 5.95% 10-year notes at 99.612 to yield 6%, or a yield spread of 511.7 bps over U.S. Treasuries, according to market sources.

The notes mature Jan. 15, 2031. The issue, which is part of the country’s 2020 external borrowing program, is being listed on the Luxembourg Stock Exchange’s regulated market.

Tata, Prosus, FEL price

Tata Motors priced $300 million of notes (expected: /B/) at 5½%, this week. The proceeds from the Regulation S notes will be used for refinancing the upcoming maturity of the company’s unrated $300 million 5¾% senior notes due May 2021.

The transaction received interest from investors across Asia and Europe, with the final order book in excess of $1.7 billion from 135 accounts and 90% of the subscription from high quality, blue-chip real money funds and asset managers.

Tata Motors is a automotive manufacturing company based in Mumbai.

Prosus sold $1.5 billion of 3.832% senior notes due 2051 (Baa3/BBB-) at a spread of 215 bps over Treasuries. The notes priced on the tight side of guidance in the Treasuries plus 220 bps area, plus or minus 5 bps.

Amsterdam-based Prosus is the international internet assets division of Cape Town, South Africa-based Naspers Ltd.

FEL Energy sold $953 million of 5¾% notes due 2040. The notes are listed for trading on the Singapore stock exchange. The energy company is based in Luxembourg with power operations in Mexico.

Istanbul Metropolitan Municipality sold $580 million of 6 3/8%, five-year notes (B2//BB-) at 99.055 for a yield of 6.6%, or 617.1 bps over U.S. Treasuries.

Istanbul Metropolitan Municipality guided pricing on its $580 million deal to yield in the area of 6¾%, according to a market source on Wednesday. Pricing was tightened from initial price talk in the area of 7%.

The order books were in excess of $2 billion before the open of financial markets in the United States.

The proceeds will be used for several metro line infrastructure projects.

The municipality is made up of district municipalities of Istanbul and governed by a non-elected council body.

Vakifbank launches

Istanbul-based lender Vakifbank launched a $750 million offering of five-year sustainable bonds (expected ratings: B2//B+) to yield 6 5/8%, a market source said on Tuesday.

The initial order book was in excess of $2.3 billion at the time the launch was announced.

Pricing was tight compared to guidance of a 6¾% to 6 7/8% yield and initial price talk in the area of 7%. Final pricing was expected later Tuesday.

The proceeds are earmarked for eligible projects under the bank’s sustainable finance framework.

Arco Vara on deck

Arco Vara’s issue is to be comprised of a maximum of 150 bonds with a nominal value of €10,000 each.

The proceeds will be used for real estate development in Estonia.

The real estate company is based in Tallinn, Estonia, and operates in Latvia and Bulgaria.

China developers bring deals

China-based property development company Kaisa Group Holdings Ltd. priced $250 million of 6½% senior notes due Dec. 7, 2021 at 99.527. The company intends to use the proceeds to refinance existing debt.

Xi’an Port Industrial Co. Ltd. priced $190 million of 5.8% senior bonds due 2023. The real estate company is based in Xi’an, China.

China’s Fantasia Holdings Group Co. Ltd. priced a $120 million tap of its 9 7/8% senior notes due Oct. 19, 2023 (//B+) at 99.794. The new notes will form a single series with the $200 million of notes issued Oct. 19.

Fantasia Holdings is a Shenzen, China-based property development company.

Zhongliang Holdings Group Co. Ltd. issued $150 million more of 8 7/8% senior notes due 2021.

The notes have identical terms to the $50 million 8 7/8% senior notes issued Nov. 23 except for the issue date and issue price.

Zhongliang Holdings is a Chinese residential property management company based in Shanghai.

And Dexin China Holdings Co. Ltd. sold $200 million of 9.95% senior notes due 2022 (B3/B-) at 96.872. They can be redeemed at any time at par plus a premium and interest. The proceeds will be used to repay debt.

The company is an investment holding company. Its subsidiaries are involved in construction services and property development.

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