Emerging Market: China prices €4 billion bonds; Saudi Arabia, Bahrain sell $2 billion apiece

By Rebecca Melvin

Concord, N.H., Nov. 12 – Sovereign issuers were the heavy hitters in the emerging markets primary market this past week. The lion’s share of deals priced at midweek ahead of the holiday on Thursday when U.S. bond markets were closed in observance of Veterans Day.

The People’s Republic of China through its Ministry of Finance priced €4 billion of senior bonds in three series. While the Kingdom of Saudi Arabia priced $3.25 billion of notes, and the Kingdom of Bahrain priced $2 billion of senior notes. Both of the Middle Eastern sovereigns priced combination deals including one Islamic bond, or sukuk, and one conventional bond.

In addition, the Republic of Peru priced €1 billion 1.95% global bonds due 2036 at 98.453 to yield 2.071% on Wednesday.

The notes priced with a spread over the interpolated mid-swap rate of 175 bps. They feature a make-whole call and then a par call, and Peru intends to invest proceeds in expenditures that may qualify as eligible social expenditures under its sustainable bond framework.

Corporate issuers held their own this past week as well. Funds flowed into emerging markets funds tracked by EPFR Global for a third straight week, and funds in hard currencies attracted twice as much money as their local currency counterparts, according to EPFR’s weekly flows update published on Friday for the previous week ending on Wednesday.

Among corporate issuers, energy and basic industries – some state owned – were the sectors that saw the most representation.

South Africa’s Sibanye-Stillwater Ltd. subsidiary Stillwater Mining Co. priced $1.2 billion of senior notes in two tranches. The notes were expected to be rated BB- by S&P.

The issuance included $675 million of 4% five-year notes, which are non-callable for two years, and $525 million 4½% eight-year notes, which are non-callable for four years.

The company said the deal was upsized due to strong investor interest.

The proceeds will be used to redeem Stillwater Mining’s 2025 notes, as well as for general corporate purposes, including advancing the group’s green metals strategy through investments and accretive acquisitions.

The $346,919,000 notes due June 2025 will be redeemed on Dec. 6 at 103.5625 plus accrued interest.

Sibanye is a mining company based in Westonaria, South Africa.

A pair of natural gas companies also tapped the markets. Tashkent, Uzbekistan-based JSC Uzbekneftegaz, also looking at BB- rated bonds, priced $700 million seven-year senior notes at par, and Gaz Finance plc priced €500 million seven-year loan participation notes at par on behalf of Moscow-based natural gas producer Gazprom.

Also from Russia, Sovcombank PJSC priced $300 million perpetual loan participation notes (expected ratings: B2//B) at par with a 7.6% coupon.

Sovcombank’s deal priced at the tight end of final guidance for the issue, which was in the range of 7.6% to 7¾% after being trimmed from a high 7% to 8% yield.

The subordinated additional tier 1 capital notes are non-callable until the first reset date on Feb. 17, 2027, and every five years thereafter.

The fixed interest rate will be reset at Treasuries plus 636.2 bps on the reset dates.

Joint lead managers and joint bookrunners of the Rule 144A and Regulation S notes were J.P. Morgan, Securities plc, Citigroup, Societe Generale, Alfa-Bank, Emirates NBD Capital, Gazprombank, ING, Mashreq Bank, Raiffeisen Bank International, Renaissance Capital, SberCIB, Sova Capital, Tinkoff, UniCredit and VTB Capital.

The proceeds of the notes will finance a subordinated loan to Sovcombank, which plans to use the funds to facilitate an increase in regulatory capital to support future growth.

Moving slightly westward, Hungary’s state-owned MVM Energetika Zartkoruen Mukodo Reszvenytarsasag priced €500 million 7/8% six-year senior notes at 98.832 to yield 1.077%, or a spread over mid-swaps of 110 bps, according to a market source.

The notes (expected ratings: /BBB-/BBB) were expected to have a maturity of six or seven years.

The notes have a make-whole call, tax and clean-up calls and a three-month par call. They are putable upon a change of control.

BNP Paribas and JPMorgan are joint global coordinators and bookrunners, and Erste Group, Goldman Sachs Bank Europe SE, OTP Bank and UniCredit are joint bookrunners of the benchmark-sized Regulation S deal, which was the company’s first offering in the international bond market.

The vertically integrated energy group is 100% state-owned by Hungary.

Another state-owned company, Medco Energi Internasional Tbk., saw its subsidiary Medco Laurel Tree Pte. Ltd. price $400 million of 6.95% seven-year senior notes (B1/B+/B+), according to a Singapore Exchange listing notice.

The oil and gas company, based in Indonesia, was expected to use the proceeds to help fund the completion of acquisitions or to refinance some of its U.S. dollar notes coming due in 2025 and 2026.

Another name from the oil sector, was E&P company, Energean plc, which priced an upsized $450 million of 6½% senior secured notes due 2027 (B/B+).

The notes priced at par and come with two years of call protection.

The bookrunners include J.P. Morgan Securities plc, ING, BNP Paribas, Credit Suisse, Deutsche Bank, Goldman Sachs International, Morgan Stanley, Natixis and Poalim IBI.

Energean intends to use proceeds from the Rule 144A and Regulation S deal to repay and cancel all commitments made available under some of its existing debt facilities, including the Egypt reserve-based lending facility and the Greek reserve-based lending facility plus subordinated debt. Proceeds will also be used to pay fees and expenses related to the new notes and for general corporate purposes.

Heavy order book

China’s €4 billion of senior bonds (A1/A+/A+) was divided among three-, seven- and 12-year duration tranches. Pricing of the Regulation S notes came tight to initial talk, and the offering was more than four-times oversubscribed, according to a release from China International Capital Corp., a joint bookrunner.

The final order book was above €17.2 billion.

Bank of China, Bank of Communications, China International Capital Corp., BofA Securities, Credit Agricole CIB, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Societe Generale, Standard Chartered Bank and UBS acted as joint lead managers and joint bookrunners.

Combo deals

Both Saudi Arabia and Bahrain priced dual tranche combination deals this past week with one Islamic bond, or sukuk, and one conventional bond.

The $2 billion Saudi sukuk was issued by KSA Sukuk Ltd. and priced at 99.229 with a profit rate of 2¼%. Its reoffer yield is 2.341% for a yield spread of Treasuries plus 90 bps.

The $1.25 billion 3¼% conventional bond priced at 97.931 for a reoffer yield of 3.36% yield and a spread over Treasuries of 153.8 bps.

For Bahrain, its $1 billion sukuk due May 18, 2029 was issued via CBB International Sukuk Program Co. WLL, and priced at par for a profit rate of 3 7/8%, or spread to U.S. Treasuries of 242 bps.

The $1 billion 5 5/8% conventional bond due May 18, 2034 priced at par to yield 5 5/8%, or a spread over Treasuries of 406.1 bps.

© 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.