Mexico City Airport prices $4 billion deal; Latin America’s new issue volume edges last year by 4%-5%

By Rebecca Melvin

New York, Sept. 13 – Strong new-deal flow continued in emerging markets on Wednesday. Mexico City Airport priced $4 billion of senior secured green notes, with $1 billion in a 10-year tranche and $3 billion in a 30-year tranche.

The new deal was twice as large as the same issuer’s two tranches priced last year at this time as part of the same borrowing plan, which is now complete.

Also among deals priced on Wednesday were Korea Development Bank’s $1 billion of fixed- and floating-rate tranches and a €225 million tap of CEZ Group’s 4% notes due 2028.

Looking ahead, the Kingdom of Bahrain’s three tranches of dollar-denominated debt is expected to total around $3 billion when final terms emerge. The deal includes a Sukuk of up to $850 million and two conventional tranches of 12 years and 30 years. There was also news that Russia plans to issue new dollar notes and tap two existing dollar note issues to fund tender offers.

Deal flow also included on Tuesday an upsized $400 million of notes from Banistmo SA, $600 million of notes from Coca-Cola Icecek AS and a $500 million benchmark from Brazil’s Klabin SA.

Typically new issuance improves in September after the summer holiday lull, but this month has been even better than usual, sources said. Currently Latin America emerging market debt year to date is running 4% to 5% ahead of the same period las year. Latin America EM debt stands right around $98.5 billion not including Wednesday’s deals, a New York-based market source said.

At least part of the reason that new issuance is strong is that U.S. Treasury yields are much lower than they were expected to be by this time of the year, the source said.

“There has been massive spread compression,” the source said.

Volume is up and duration is gaining. “People can go a lot longer than they were used to going. They are reaching out for 10s when they were previously doing 7s,” the source said, regarding 10-year and seven-year maturities.

The source thought that the trend would remain intact for the remaining months of 2017, pushing volumes to multi-year highs.

Sudden curve steepening might douse enthusiasm, but otherwise there isn’t much to hold the market back, and there hasn’t been massive spread widening in the existing universe, the source noted.

Mexico’s 10-year came essentially flat to existing issues, the source said.

New issue concessions are very low and in investment-grade, there is negative new issue concession, the source said.

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