Emerging Markets: Romania, Nemak return to primary; Durkan sells sukuk; Pakistan, Mexico issue

By Rebecca Melvin

Concord, N.H., July 9 – On the heels of new bond issues priced not too long ago, a pair of emerging markets issuers swooped in for a new deal during this past holiday-shortened week.

U.S. financial markets were closed on Monday in observance of its Independence Day.

Romania, acting through the Ministry of Public Finance, priced €3.5 billion of nine-year notes and long 20-year notes, marking its second offering this year. Romania priced €3.5 billion of notes due in 2033 and 2041 on April 8. And before that the sovereign priced a €2.5 billion two-part deal, including 2029 notes and 2040 notes, in December.

Among corporates, Mexico’s Nemak SAB de CV priced €500 million 2¼% seven-year sustainability-linked bonds at par on Thursday. Nemak’s new bond followed closely on the heels of the company’s $500 million sustainability-linked bond that priced less than a month ago. That, marking its first in the sustainability-linked bond market, was 10-year paper.

In addition to regulars in the emerging markets bond market, there was a newcomer this past week. On Wednesday, Dukhan Bank QPSC, a retail bank based in Doha, Qatar, sold $500 million 3.95% perpetual tier 1 sukuk.

The issue was more than 4.5 times oversubscribed with order books reaching $2.35 billion.

Pricing was tight to guidance of a 4% to 4 1/8% yield and initial price talk for a 4 3/8% area yield.

The issue is non-callable for 5.5 years and then callable at par between the first call date and the first reset date on Jan. 14, 2027 and on any distribution date thereafter. The reset dates will occur on every fifth anniversary after the first reset date, and distribution dates are Jan. 14 and July 15 in each year beginning Jan. 14, 2022.

Back in the sovereign space, issuers this past week included Pakistan, which priced three add-on tranches for $1 billion of senior notes in total on Tuesday, and Mexico, which allocated €1.25 billion of 2¼% 15-year sustainable bonds on Tuesday at 99.888 to yield 2.259%, or a mid-swaps plus 195 basis points spread. In addition, the Republic of Lithuania priced €750 million of ¾% fixed-rate notes due 2051 at 96.354, according to a London Stock Exchange notice on Friday.

Other notable issuance this past week included Asian Development Bank’s €1 billion of 0.1% 10-year notes on Tuesday at 99.781. Bookrunners for the Manila-based development bank’s paper were Credit Agricole CIB, Deutsche Bank, Goldman Sachs International and HSBC.

Prosus NV priced $4 billion equivalent of dollar- and euro-denominated notes under its global medium-term note program. The three tranches included $1.85 billion of 3.061% notes due 2031, €1 billion 1.288% notes due 2029 and €850 million 1.985% notes due 2033.

The purpose of the offerings is to raise proceeds for general corporate purposes, including debt refinancing, which may take the form of redemptions, repayments at maturity, tender offers, repurchases or other transactions.

The current favorable market backdrop enabled Prosus to extend its debt maturity profile as part of a refinancing of its existing debt, the company said in its release.

The offerings are expected to close on July 13, subject to customary closing conditions.

Amsterdam-based Prosus is the international internet assets division of Cape Town, South Africa-based Naspers Ltd.

Although a smaller offering, Rail Capital Markets plc’s $300 million of five-year senior loan participation notes was also notable. The issuance, which amounts to a loan on behalf of state-owned rail transport company Ukrainian Railways, priced at par. The proceeds will be used to refinance repayment debt of the Kyiv, Ukraine-based rail company.

Among deals priced by China issuers, Beijing-based home electronics company, Xiaomi Best Time International Ltd., priced $1.2 billion of bonds in two tranches that are guaranteed by Xiaomi Corp. The notes included $800 million of 2 7/8% 10-year senior bonds and $400 million of 4.1% 30-year senior green bonds, according to a company announcement.

The tranche of bonds due July 14, 2031 priced at 99.141, and the tranche of green bonds due July 14, 2051 priced at 98.994.

Both issues have make-whole calls and also par calls at three months prior to maturity for the 10-year bonds and at six months prior to maturity for the 30-year bonds.

Proceeds from the green bonds will be used to finance or refinance new or existing green projects. Proceeds from the 10-year bonds will be used for general corporate purposes.

For Maanshan, Anhui, China-based dairy farmer, China Modern Dairy Holdings Ltd., a $500 million offering of 2 1/8% bonds due 2026 priced at 99.717 after trading hours on Wednesday.

Proceeds from the Regulation S offering will be used for refinancing and general corporate purposes.

China’s Zhejiang Expressway Co. Ltd. priced $470 million of 1.638% bonds due 2026 (expected ratings: /A/A+) at par, according to a market announcement, and Zhejiang Energy International Ltd. listed a $2 billion medium-term note program, according to an offering circular.

Notes issued under the electricity company’s program are benefitted by a keepwell, liquidity support and equity interest purchase undertaking deed from parent company Zhejiang Provincial Energy Group Co. Ltd. (A1).

Nemak brings another SLB

Nemak priced €500 million 2¼% seven-year sustainability-linked bonds (Ba1/BB+/BBB-) at par on Thursday.

Pricing was set below guidance for yield in the 2 3/8% area and initial talk for a yield in the 2½% area.

The notes have a make-whole call at the applicable comparable government bond rate plus 40 bps and a par call on or after April 29, 2028.

There is a change-of-control put at 101% of par plus interest.

A listing on Euronext Dublin is expected.

Banco Bilbao Vizcaya Argentaria SA, BNP Paribas and HSBC Bank plc were joint lead bookrunning mangers and joint sustainability-linked bond structuring agents for the Rule 144A and Regulation S issue.

Passive bookrunners were Merrill Lynch International, Citigroup Global Markets Ltd., J.P. Morgan Securities plc and Banco Santander SA.

The proceeds are expected to be used to pay in whole or in part the consideration for the company’s tender offer and consent solicitation for its 2024 notes, with the remainder if any for debt repayment and other general corporate purposes.

The company placed $500 million in its inaugural sustainability-linked issue in June.

Nemak is a global automotive parts manufacturing company based in Garcia, Greater Monterrey, Mexico.

Three sovereigns price

Romania priced a €2 billion tranche of nine-year notes priced at 99.95 and a €1.5 billion tranche of 20-year notes at 98.218.

JPMorgan, Erste Bank, ING, RBI and Unicredit were the managers of the Regulation S offering.

The issuance follows closely on the heels of €3.5 billion of notes in two tranches that the sovereign sold in April.

Pakistan priced on July 6 three add-ons. They included $300 million of 6% notes due April 8, 2026 priced at 100.499 for a 5 7/8% yield, or a spread of Treasuries plus 506.3 bps; $400 million of 7 3/8% notes due April 8, 2031 priced at 101.718 for a 7 1/8% yield, or 575.3 bps over Treasuries; and $300 million tranche of 8 7/8% notes due April 8, 2051 priced at 104.577 for an 8.45% yield, or 644.8 bps over Treasuries.

Credit Suisse, Deutsche Bank, Emirates NBD Capital, JPMorgan and Standard Chartered Bank are the joint lead managers and joint bookrunners, and BOC International is joint lead manager and passive joint bookrunner of the Rule 144A and Regulation S transaction.

Following the add-ons, Pakistan now has $1.3 billion of the 2026 notes, $1.4 billion of the 2031 notes and $800 million of the 2051 notes.

Mexico initially talked its bonds at mid-swaps plus 220 bps area and then later guided to the mid-swaps plus 205 bps area.

The notes have a make-whole call at Bunds plus 35 bps and then a par call three months before maturity.

BNP Paribas (bill and deliver), BofA Securities Inc. and Natixis Securities Americas LLC are the joint bookrunners.

The proceeds from the sale of the bonds are to be used to fund budgetary programs that qualify as eligible sustainable development goals expenditures under the SDG Sovereign Bond Framework.

Investors move into funds

Overall, $18.3 billion flowed into bond funds the first week of the third quarter, according to EPFR data tracker. The last time flows were that high was early February when retail investors were roiling equity markets with their short squeezes and focus on “meme stocks.”

At the single country and asset class fund levels, flows into Brazil bond funds hit levels last seen since the first quarter of 2014 and China bond funds took in another $347 million. Hard currency emerging markets bond funds again outgained their local currency counterparts, this time by a 2-to-1 margin, and funds with sovereign debt mandates took in three times as much money as those dedicated to investment-grade corporate debt.

© 2015 Prospect News.
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