Emerging Markets: Abu Dhabi prices $2 billion; Pakistan Water sells $500 million green notes

By Rebecca Melvin

Concord, N.H., May 28 – Some issuers squeezed in new emerging markets bond deals this week ahead of the long holiday weekend in the United States and the United Kingdom. But others stood clear and prepared deals for pricing in the post holiday week. Latin American issuers, for example, are notable among issuers waiting until June to print new notes.

Financial markets are closed on Monday in the United States in observance of Memorial Day and in the United Kingdom in observance of the Spring Bank Holiday.

Among sovereign issuers that brought deals this past week, the Emirate of Abu Dhabi sold a $2 billion seven-year bond. The government priced the notes with a 1 5/8% coupon and a spread over U.S. Treasuries of 45 basis points. Price talk was in the Treasuries plus 70 bps to 75 bps area.

J.P. Morgan Securities plc was the stabilization coordinator and manager of the Regulation S offering along with Citigroup, First Abu Dhabi Bank, HSBC and Standard Chartered Bank as managers.

A listing on the London Stock Exchange is expected.

Also for Abu Dhabi, Mamoura Diversified Global Holding PJSC priced a $1.5 billion dual-tranche offering, including $500 million 2½% 10-year notes and $1 billion 3.4% Formosa bonds maturing 2051, according to market sources.

The tranches were issued by are guaranteed by MDGH-GMTN (RSC) Ltd.

The 2½% notes priced at 99.719 to yield mid-swaps plus 95 bps, and the Formosa bonds priced at par to yield mid-swaps plus 138.8 bps.

J.P. Morgan Securities plc, ADCB, Citi, FAB, Morgan Stanley and Standard Chartered were managers of the Regulation S transaction.

MDGH is an investment company indirectly wholly owned by the government of Abu Dhabi.

Moving westward, Pakistan Water and Power Development Authority priced its first green bond, bringing $500 million of 7½% senior unsecured green notes due 2031 (expected ratings: /B-/B-) at par, yielding a spread over mid-swaps of 592.8 bps, according to a market source.

J.P. Morgan Securities plc, Deutsche Bank and Standard Chartered Bank were joint bookrunners of the Regulation S deal, and Habib Bank Ltd. was co-manager.

The authority intends to use the proceeds to partly refinance debt and fund capital spending.

Hong Kong’s AAC Technologies Holdings Inc. sold $650 million of notes in two parts, according to an announcement.

The company, which supplies mobile phone and consumer electronics products, priced a $300 million tranche of 2 5/8% notes due 2026 at 99.87.

Additionally, AAC sold a $350 million part of 3¾% notes due 2031 at 99.193.

Both series have make-whole call and then par calls.

J.P. Morgan Securities plc, Citigroup Global Markets Ltd. and China International Capital Corp. Hong Kong Securities Ltd. were joint global coordinators for the Regulation S issue.

Joining those banks as joint bookrunners and joint lead managers are DBS Bank Ltd. and HSBC Ltd.

Proceeds will be used for refinancing and general corporate purposes.

The notes will be listed on the Stock Exchange of Hong Kong Ltd.

Moving northward to Russia and the Central & Eastern Europe regions, Russia’s Novolipetsk Steel (NLMK) priced $500 million of five-year loan participation notes (Baa2//BBB) on Wednesday at par for a yield spread of 170.2 bps over mid-swaps, according to a syndicate source.

Pricing came tight to talk for a yield between mid-swaps plus 190 bps and 200 bps.

BofA Securities, JPMorgan and Societe Generale CIB were the joint lead managers and joint bookrunners for the Rule 144A and Regulation S notes.

The initial price talk was released in conjunction with expiration of an invitation by NLMK (acting via Steel Funding DAC as the offeror) to holders of its outstanding U.S. dollar-denominated notes due 2023 and 2024 to tender up to $500 million principal amount of the notes for cash. The new notes’ proceeds are to finance the tender offers, with remaining proceeds, if any, to be used for general corporate purposes.

The steel company is based in Lipetsk, Russia.

And Lithuania’s Akropolis Group UAB priced €300 million 2 7/8% five-year senior notes (expected ratings: /BB+/BB+) at 99.428 to yield 3%, according to a market source.

Pricing for the company’s inaugural international bond came at the tight end of talk for yield of 3% to 3¼% area.

Note guarantors are Ozo Turtas UAB, Taikos Turtas UAB, Aido Turtas UAB and M257 SIA.

BNP Paribas and JPMorgan were the joint global coordinators together with Luminor as joint bookrunner of the Regulation S transaction, which is expected to settle on June 2.

The proceeds are earmarked for general corporate purposes, including expansion by organic growth and/or acquisitions, development capital expenditures and debt refinancing.

The real estate development company is a subsidiary of Vilniaus Prekyba UAB group and based in Vilnius, Lithuania.

Bond issuance for the Africa continent has been sparse of late. But this past week, South Africa’s Absa Group Ltd. sold an upsized $500 million in additional tier 1 hybrid capital bonds.

Order books reach $3 billion from more than 200 accounts.

The company had initially planned for a $400 million offering size.

The May 20 issuance is part of Absa’s ongoing capital management strategy.

Absa Group’s main operating subsidiary is Absa Bank Ltd., a Johannesburg-based commercial and investment bank.

Fund flows remain strong

The latest week saw flows into China bond funds account for a third of the headline number for all emerging markets bond funds, according to data tracker EPFR.

Funds with sovereign bond mandates attracted three times the amount absorbed by emerging markets corporate funds, and redemptions from short-term emerging markets funds hit a nine-week high. At the country level, Colombia bond funds posted their fifth straight outflow, and 11th in the past 13 weeks. EPFR attributed to weaker flows to investors digesting the Andean nation’s recent loss of an investment grade rating from Standard & Poor’s.

EPFR-tracked bond funds overall posted their 11th consecutive inflow during the week ending May 26. But the headline number dropped for the sixth week running as investors shifted their focus to when, and to what degree, the world’s major central banks will taper the measures their deployed to buffer their economies from the impact of the Covid-19 pandemic.

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