EM awakens from summer lull with deal launches; Mexico City Airport to price dual tranches

By Rebecca Melvin

New York, Sept. 5 – Tuesday’s session in emerging markets was a busy one for new deal launches as market players in the United States returned to work after Monday’s market close for Labor Day and following a two-week lull in activity amid summer holiday schedules.

Existing paper was under pressure, however, as U.S. Treasuries rallied amid reports showing a lack of consensus among members of the U.N. Security Council over how to deal with the North Korea nuclear threat.

Defiant statements from North Korea on the heels of a test of its sixth nuclear device, which it described as a hydrogen bomb, kept tensions high.

Investors were also eyeing the return of lawmakers to Congress and the prospects for the debt ceiling bill, a market source noted.

The yield on the U.S. 10-year Treasury fell to a fresh low for 2017 so far.

“That’s an indication of some level of risk-off, but I don’t think there are going to be big movements. In the meantime, there was a lot of new issue activity showing the gates are open,” the source said.

Most of the new paper will be seen next week, the source said, including Mexico City Airport’s dual tranches of dollar-denominated senior secured notes for up to $4 billion of financing, according to a market source.

Last year Mexico City Airport priced a $2 billion deal in two tranches, and it is “looking to do the remainder now,” a source said.

Proceeds are being used to finance environmentally beneficial projects, including a new passenger terminal building, ground transportation center and air traffic control center.

Citigroup, HSBC and JPMorgan are global coordinators and bookrunners of the new notes, and Santander and BBVA are also bookrunners.

Brazil’s Klabin SA was set to begin a roadshow of dollar-denominated notes on Thursday, with a deal expected to follow after meetings wrap up on Monday.

The banks involved in the Sao Paulo-based pulp, paper and paper products company’s deal are Bank of America, Santander Investment Securities, Itau BBA, Citigroup and Morgan Stanley.

Fellow pulp and paper company Suzano Papel e Celulose SA, also from Brazil, too plans to issue new notes. Its deal is in the form of an add-on to the existing Suzano Austria GmbH 7% notes due 2047.

Proceeds will be used to finance all or part of a concurrent tender for $100 million of Suzano’s 5 7/8% senior notes due 2021, which is a $645.7 million outstanding issue currently.

JPMorgan, Santander Investment Securities Inc., BB Securities Ltd., Itau BBA USA Securities, Inc. and Mizuho Securities USA LLC are dealer managers of the tender and new notes.

Chile’s Empresa Nacional del Petroleo (ENAP) was also tapping the international bond market and selected bookrunners for a long-dated benchmark of dollar-denominated notes that will be priced via Bank of America, Citigroup and JPMorgan following a roadshow scheduled to wrap up on Friday.

Santiago-based ENAP is a state-owned energy development and production enterprise of Chile.

In addition, Panama’s Banistmo SA is on the calendar for a $300 million deal of senior unsecured notes (expected rating: //BBB), with proceeds going to the financial services company earmarked for general corporate purposes.

In the region of Central & Eastern Europe, the Middle East and Africa, Turkey’s Coca-Cola Icecek AS launched a deal that was expected to be $500 million to $750 million in size with expectations that it could be held in cash until time to repay its existing $500 million CCOLAT 4¾ notes due Oct. 1, 2018, according to a market source.

The new Coca-Cola Icecek bond may have a tenor of up to 10 years, and the expectation is that the strong credit may attract some crossover investment-grade investors in addition to emerging markets investors.

The Istanbul-based bottler has mandated BNP Paribas, Citi, HSBC, JPMorgan and MUFG as the bookrunners for the senior notes, which will be sold under Rule 144A and Regulation S.

Depending on the terms and tenor it may be an index name, a market source said.

The deal is expected to price next Monday or Tuesday following investor meetings in London and the United States.

“This company has low leverage ratios, and it may maintain a large cash balance to pay for the [2018] deal when it becomes due,” the source said.

Coca-Cola Icecek distributes into emerging market regions including Pakistan.

Also launching early Tuesday is a deal from Russia’s Novolipetsk Steel, for which proceeds will be used to pay for the tender offers of two dollar-denominated series of notes maturing in 2018 and 2019.

The Lipetsk, Russia-based company has named ING Bank NV, London Branch, J.P. Morgan Securities plc, Societe Generale and UniCredit Bank AG to act as joint dealer managers for the offers.

In Asia, the Philippines’ Asian Development Bank has mandated banks for a five-year dollar-denominated offering. The bookrunners are BofA Merrill Lynch, BNP Paribas, Mizuho and TD Securities.

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