Primary hosts Central American Bottling, Jain Irrigation Systems price notes; Turkey ‘astonishingly solid’

By Christine Van Dusen

Atlanta, Jan. 26 – Guatemala’s Central American Bottling Corp. and India’s Jain Irrigation Systems Ltd. priced notes on a mostly firm Thursday that saw emerging markets investors focusing on rates.

“For EM credit, it’s all about rates and rate volatility,” a London-based analyst said. “Sentiment however remains firm, at least until higher rates also translate to a weakening in EM currencies.”

Turkey bonds managed to perform, even after the lira weakened and ahead of Fitch Ratings’ update.

“For tomorrow, we expect a generally benign reaction should Fitch decide to downgrade Turkey to BB+,” he said. “First, the current levels of the Turkish sovereign already incorporate a BB/BB- rating, and we think that market consensus is skewed towards a downgrade. Second, with Moody’s having downgraded Turkey to Ba1 in September, we believe the majority of forced sellers are already out of the way.”

There could be an “initial kneejerk reaction as a result of panic-selling and potential forced selling by some local accounts due to increased risk-weights from holding Turkish non-lira denominated assets,” he said. “We, however, view any substantial widening as a buying opportunity.”

As evidence he pointed to the performance of bonds from Brazil and Bahrain after they were downgraded in 2015 and 2016.

“For both, we saw a meaningful underperformance versus the market,” he said. “Contrarily, the loss of the last investment grade rating saw Bahrain trading in line with EMBI and Brazil outperforming in a strong recovery rally in the aftermath, driven by signs of upcoming political change in the latter.”

But much will depend on market sentiment, he said.

“Over the last few days, performance of Turkish credit has been astonishingly solid, which gives hope that markets might overlook a potential downgrade,” he said. “A rating affirmation could even boost Turkish credit further in the near term.”

Central American Bottling deal

In its new deal, Guatemala’s Central American Bottling priced $500 million 5¾% notes due 2022 at 99.065 to yield 5 7/8%, a market source said.

Citigroup and JPMorgan led the Rule 144A and Regulation S transaction.

The producer, distributor and marketer of beverage products is based in Guatemala City.

Jain Irrigation sells bonds

India’s Jain Irrigation priced a $200 million issue of 7 1/8% notes due Feb. 1, 2022 at 98.97, a market source said.

Deutsche Bank and JPMorgan were the joint global coordinators, joint bookrunners and joint lead managers for the Regulation S deal. Barclays, Nomura and Rabobank were joint bookrunners and joint lead managers.

Jain is a Jalgaon-based agri-business company and manufactures irrigation systems in India.

Rusal seeks issuance

In other deal-related news, Russia’s Rusal Capital DAC – part of United Co. Rusal plc – is planning to issue dollar-denominated notes due in five years, according to a company announcement.

JPMorgan, Credit Agricole CIB, Citigroup, Credit Suisse, Gazprombank, ING Bank, Raiffeisen Bank International, Renaissance Capital, Sberbank CIB, Societe Generale, UBS, Unicredit and VTB Capital are the bookrunners for the Rule 144A and Regulation S deal.

Rusal is an aluminum company based in Moscow.

Embraer prints notes

On Wednesday, Brazil’s Embraer SA, via Embraer Netherlands Finance BV, priced $750 million 5.4% notes due Feb. 1, 2027 at par to yield 5.4%, or Treasuries plus 287.7 basis points, according to a company filing.

BB Securities, JPMorgan and Santander were the bookrunners for the Securities and Exchange Commission-registered deal.

The proceeds will be used for general corporate purposes.

Embraer is an aircraft manufacturer based in Sao Jose dos Campos, Brazil.

Issue from China Water Affairs

China Water Affairs Group Ltd. priced $300 million 5¼% notes due Feb. 7, 2022 at 98.92, according to a company filing.

Morgan Stanley was the bookrunner for the Regulation S deal.

Proceeds will be used for general corporate purposes, including financing working capital and repayment of certain indebtedness.

China Water Affairs, based in Hong Kong, is one of the largest publicly listed water supply companies in China.

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