Emerging markets: EM green bonds grow so far this year; Gazprom adds a deal in quiet week

By Rebecca Melvin

New York, Feb. 19 – The emerging markets green bond space is on a tear right now. In January alone there were 28 green bond deals totaling $14.744 billion, representing a single biggest issuance month that Prospect News has tallied since it started actively tracking emerging markets green bonds in 2011.

So far in 2021, there have been 39 new emerging markets green bonds for $20.44 billion of issuance, which is nearly three times the $6.82 billion in 14 deals priced in January and February 2020 and four times the $4.374 billion in 10 deals priced in January and February 2019. It should be noted that emerging markets bond issuance is up about 20% in general in 2021 from the year-earlier period. For all of 2020 and 2019 there were 91 deals totaling $38.12 billion in emerging markets green bond issuance and 79 deals totaling $38.413 billion in emerging markets green issuance, respectively.

Notable issuers in the last two months have included West African Development Bank, and issuers from Brazil, India and elsewhere.

West Africa Development Bank priced €750 million 2¾% 12-year sustainability bonds to yield 300 basis points over mid-swaps. It was the bank’s first issue with sustainable development objectives, and more than 260 investors participated, with demand at €4.4 billion during pricing. The multilateral development bank is based in Lome, Togo.

From Brazil, Movida Participacoes SA, the country’s largest rental car company, sold $500 million of 5¼% sustainability-linked notes due 2031. The note, which was issued in the first week of February, was the first issue of sustainable notes by the company. To maintain the interest rate, the company must reduce its greenhouse emissions by 30% by 2030.

Brazilian pulp and paper company Klabin SA sold $500 million of 3.2% notes with a 10-year tenor in early January through its Klabin Austria GmbH subsidiary. The bonds of the pulp and paper products company have three targets related to environmental goals. They include reducing consumption of natural resources and increasing recycling of water and solid waste. Additionally, it is focusing on biodiversity, looking to restore and sustainably manage biomes.

Brazil’s largest grain and fiber company, Andre Maggi Participacoes SA, sold $750 million of sustainable notes this year in a debut issue with a 5¼% coupon and a maturity in 2028. The deal priced through its Amaggi Luxembourg International Sarl subsidiary.

The green paper is not all denominated in hard currencies. Singapore’s Surbana Jurong Private Ltd., a government owned infrastructure and urban development consultancy, priced two separate deals in the past month, including S$250 million of 2.48% sustainability-linked notes due 2031 and $350 million of 4.11% of sustainability-linked notes due 2031. The notes are being listed on the Singapore Exchange Securities Trading Ltd.’s official list.

Mumbai-based cement maker UltraTech Cement Ltd. issued $400 million of 2.8% senior sustainability-linked notes due 2031 on Feb. 16. The notes will be listed on the Singapore Exchange Securities Trading Ltd. as well.

Light week notched

Meanwhile, emerging markets debt issuance overall was nearly at a standstill this past week as market players seemed to take a break amid the Chinese New Year holiday. China issuers were conspicuous in their absence in the tally of new deals. In addition, EM Bond Funds posted their first outflow since late September, snapping a 19-week inflow streak, according to data tracker EPFR.

The slowly rising yields on 10-year US Treasuries prompted investors to take stock of emerging markets debt’s recent rally and its prospects if inflation does take off in the United States, EPFR said in its latest weekly update. At the country level, flows to China Bond Funds fell to their lowest level since early in the third quarter of 2020, but Frontier Markets Bond Funds racked up their biggest inflow since mid-September.

For the week ended Feb. 19, there was short of $2 billion of issuance in only a handful of deals. The quiet week didn’t stop PJSC Gazprom, a frequent issuer in the emerging markets bond market. It priced €1 billion of 1½% loan participation notes due 2027 through its Gaz Finance plc subsidiary, making up more than half of the total volume this past week. The natural gas producer’s series 7 notes priced under its €30 billion medium-term loan program, via GPB-Financial Services Ltd, J.P. Morgan Securities plc, Intesa Sanpaolo SpA, London Branch, SMBC Nikko Capital Markets Ltd. and VTB Capital plc as the bookrunners.

In addition, India Toll Road priced $300 million of 5½% secured notes due 2024, according to a notice.

The issuer is held in trust for the purpose of purchasing the onshore senior secured non-convertible debentures of IRB Infrastructure Developers Ltd. The proceeds of those debentures will be used to refinance existing debt, to fund capital expenditures and for general corporate purposes for IRB, according to two rating agencies’ notes.

IRB is an engineering and construction project company focused on building highways in India.

The Rule 144A and Regulation S bonds were sold via Barclays Bank plc, Deutsche Bank AG Singapore Branch and J.P. Morgan Securities plc are the bookrunners.

Looking ahead to next week, China issuers should be back in play. In addition, National Bank of Kuwait SAKP plans to price a dollar-denominated benchmark offering of perpetual non-call six-year tier 1 subordinated notes, according to a notice.

The notes will be issued through NBK Tier 1 Ltd.

J.P. Morgan Securities plc, Citi, HSBC, NBK Capital, Standard Chartered Bank and UBS Investment Bank are managers for the Regulation S and Rule 144A offering.

The bank is based in Kuwait City.

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