Emerging Markets: Dominican Republic, Panama, Morocco sell bonds; ChemChina, Cemex price

By Rebecca Melvin

New York, Sept. 25 – The emerging markets saw a strong mix of sovereign and corporate bond debt price this past week, with the deals from the corporate side representing a mix of sectors.

But there were further signs of stress among emerging economies as countries across the world struggle with the impacts of the Covid-19 pandemic. Zambia announced it is seeking to defer interest on $3 billion of notes in three series for six months until April. Investors eyed where the fault lines are stretching beyond Argentina, Lebanon and Ecuador, which have defaulted since March.

Emerging markets bond funds continued to see flows recover from the lows of March; however, even as high-yield bond funds stalled during the week ended Sept. 23, according to the data tracker EPFR.

In its weekly update, EPFR said the latest inflows were the 12th in a row for emerging markets bond funds. As was the case the previous week, the positive numbers were largely due to the robust flows into China bond funds, which took in over $1 billion for the first time. That trend may hit a wall in October, according to Tim Cheung and Riki Zhang from EPFR sister company Informa Global Markets.

In a recent note, they observed that China’s central bank is showing a general reluctance to boost market liquidity. That, they believe “is reinforcing the market perception that the monetary easing cycle is already largely over and borrowing costs will start creeping upward,” with a good chance of a selloff of Chinese bonds in October.

In terms of new deals this past week, the Dominican Republic placed about $3.8 billion of a triple tranche of bonds, including two dollar-denominated tranches and one reopening of a note denominated in local currency.

The Republic of Panama priced $2.25 billion of bonds, or $1.25 billion of 2.252% global bonds due 2032 and an additional $1 billion of its 3.87% global bonds due 2060.

The new 2032 bonds (Baa1/BBB+/BBB) are priced at par to yield 2.252%, or a spread of 158 basis points over Treasuries.

The add-on 2060 bonds (Baa1/BBB+/BBB) priced at 112.915 to yield 3.278%, or Treasuries plus 185 bps. The further issuance will be consolidated to form a single series with the outstanding $750 million of 3.87% bonds due 2060 issued on July 23, 2019.

Morocco priced €1 billion of notes in two tranches on Thursday, including 5.5-year notes and 10-year notes (BBB-/BBB-), according to a market source.

The €500 million of 1 3/8% 5.5-year notes priced at 99.374 to yield 1.495%, or a yield spread of mid-swaps plus 190 bps.

Initial price talk for the 5.5-year notes was for a yield in the area of mid-swaps plus 200 bps.

The €500 million of 2% 10-year notes priced at 98.434 to yield 2.176%, or a yield spread of mid-swaps plus 240 bps. The 10-year notes were talked initially at the mid-swaps plus 250 bps area.

Barclays, BNP Paribas, JPMorgan and Natixis are joint lead managers and joint bookrunners of the Rule 144A and Regulation S transaction.

In corporate action, China National Chemical Corp. Ltd. (ChemChina) priced $1.8 billion of notes in four parts, including five-, 10- and 30-year notes and a $600 million tranche of subordinated perpetual securities.

All the notes were issued by wholly owned subsidiary CNAC (HK) Finbridge Co. Ltd.

The $600 million of five-year notes priced with a 2% coupon; the $1 billion of 10-year notes priced with a 3% coupon; the $200 million of 30-year notes priced with a 3.7% coupon; and the $600 million of subordinated perpetual securities priced with a 3.35% coupon.

ChemChina is a state-owned chemical company based in Beijing.

Another industrial company from another part of the world, Cemex SAB de CV issued $1 billion of 5.2% senior guaranteed notes due 2030 (BB/BB-) at par.

They are non-callable for five years.

The proceeds will be used for general corporate purposes, including repaying debt.

Cemex is a cement producer based in Monterrey, Mexico.

Food and beverage producer and distributor, Tingyi (Cayman Islands) Holding Corp., based in Tianjin, China, priced a $500 million issue of 1 5/8% notes due 2025 (Baa1/BBB+).

The proceeds of the Regulation S deal will be used to refinance debt and for general corporate purposes.

Among financial companies, Asian Infrastructure Investment Bank (AIIB) priced $3 billion of ¼% three-year notes (Aaa) at 99.803, according to a Tuesday FWP filing with the Securities and Exchange Commission.

The notes priced to yield 0.316%, or Treasuries plus 16.5 bps.

A state-owned asset manager, China Huarong Asset Management Co., Ltd. priced $1.2 billion of notes in three tranches, including notes due 2023 and 2030 (expected ratings: Baa1//A) and perpetual securities (expected rating: Baa1/A/A), which are all being issued under the company’s newly listed $5.9 billion medium-term note program.

Notes under the program will be issued through Huarong Finance 2019 Co., Ltd. and guaranteed by China Huarong International Holdings Ltd., according to a notice.

The $600 million tranche of 2 1/8% notes due Sept. 30, 2023 priced at 99.757, and the $350 million tranche of 3 5/8% notes due 2030 priced at 99.659. The $250 million tranche of perpetual securities priced at par with an initial distribution rate of 4¼%.

The perpetual securities are non-callable until Sept. 30, 2025 and have a rate reset date every five years.

An investment holding company based in Guangzhou, China, China Aoyuan Group Ltd. issued $350 million of 6.2% 5½-year senior notes (B2//BB-) on Thursday, according to a notice.

AMTD Global Markets Ltd., Barclays Bank plc, China Citic Bank International Ltd., China International Capital Corp. Hong Kong Securities Ltd., CMB International Capital Ltd., Deutsche Bank AG, Singapore Branch, Guotai Junan Securities (Hong Kong) Ltd., Haitong International Securities Co. Ltd., Hongkong and Shanghai Banking Corp. Ltd., Merrill Lynch (Asia Pacific) Ltd., Morgan Stanley & Co. International plc, Oversea-Chinese Banking Corp. Ltd. and UBS AG Hong Kong Branch are the bookrunners.

Zambia seeks to defer coupons

Zambia announced this past week that it is soliciting consents from holders of $3 billion of notes in three series to defer interest payments and make related modifications to those indentures as the sovereign grapples with an unsustainable debt load due to the Covid-19 coronavirus pandemic and other factors.

Specifically, the sovereign is seeking to defer payments for six months to April 14, 2021 for the following:

• $750 million of 5 3/8% notes due 2022 (ISINs: XS0828779594, US988895AA69);

• $1 billion of 8½% notes due 2024 (ISINs: XS1056386714, US988895AE81); and

• $1.25 billion of 8.97% notes due 2027 (ISINs: XS1267081575, US988895AF56).

A quorum of at least one-third of the holders of the notes is needed to approve the changes. Holders who approve the changes will receive a consent fee of $0.50 per $1,000 bond, and future interest payments will be reduced by an amount equal to the consent fee.

No interest will accrue during a standstill period set to begin Oct. 14, and breach or alleged breach of obligation under the notes will be waived. All other modifications being sought are deemed necessary to put the interest deferral into effect.

The proposal dated Sept. 22 is intended as a first step to give Zambia “the necessary breathing time” to analyze the sustainability of its debt and define the parameters of a debt restructuring strategy, which is a pre-condition to obtaining relief lending from the International Monetary Fund.

Zambia said that it is faced with unprecedented liquidity constraints that have been exacerbated by the Covid-19 pandemic resulting in a substantial decline in revenue. A combination of declining revenue and increased unbudgeted costs caused by the pandemic have resulted in a material impact on the government’s available resources to make timely payments on its debt.

Zambia has been engaged with the IMF for a few months to discuss assistance under the IMF’s debt sustainability framework for low-income countries. Zambia also filed with the G20 Debt Service Suspension Initiative and has entered into a memorandum of understanding with the Paris Club of lenders. In line with a G20 recommendation, Zambia has also decided to seek the participation of its external commercial creditors in similar debt services suspension arrangements.

A call with investors will be conducted at 5:30 p.m. ET on Sept. 29. Meetings regarding the consent solicitations are tentatively scheduled to be held in London on Oct. 20, but the meetings may be held virtually.

Morrow Sodali Ltd. is the information and tabulation agent for the consent solicitations.

DR brings triple tranche

The Dominican Republic issuance includes a new offering of $1.8 billion of notes with a 12-year tenor and a yield of 4 7/8%.

The sovereign added on to the 6¼% notes due in 2060, raising $1.7 billion in the add-on.

And, there was an add-on for Ps. 17.5 billion to the nation’s 10% notes maturing in 2026.

The issue was more than 2.5 times oversubscribed.

This is the country’s largest bond issue to date.

“Never has the country received such a great demand for our titles. This is an unequivocal sign of the confidence that international markets are giving to our country and to the current government,” said Minister Jochi Vicente.

Proceeds will be used to cover the commitments of the administration for the end of 2020, including the social assistance programs Stay At Home, FASE and Pa ‘Ti. Proceeds will also be used to finance government plans in the health sector to combat the pandemic.

Citibank and JPMorgan managed the transaction.

© 2015 Prospect News.
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