Emerging markets: Debt issuance notably quiet; Lithuania sells €2 billion deal; Israel prices

By Rebecca Melvin

New York, May 1 – Emerging markets debt was notably quiet this past week as fallout from the Covid-19 pandemic continued to wrack global markets. But oil prices improved this past week with the Organization of the Petroleum Exporting Countries and its allies due to start cutting production this month after agreeing to reduce output in May and June, thereby granting some relief to the many EM countries that depend on oil revenue for their state coffers.

Lithuania priced €2 billion of notes in two tranches due 2025 and 2030 on Tuesday and was a bright spot in an otherwise mostly dull week.

Lithuania sold €750 million of ¼% five-year notes at 99.53 for a yield of 0.345%, or spread of 60 basis points over mid-swaps, and €1.25 billion of ¾% 10-year notes at 99.245 for a yield of 0.829%, or spread over mid-swaps of 90 bps.

The pricing was at the tight end of guidance of mid-swaps plus 60 bps to 65 bps, which was the tight end of the five-year notes and at mid-swaps plus 90 bps to 95 bps guidance for the 10-year notes.

The combined order book stood in excess of €3.25 billion, with a small skew toward the 10-year notes at the time guidance was released.

BNP Paribas (billing and delivery), Citigroup and Erste Group were bookrunners of the Regulation S deal.

In the Middle East region, Qatar National Bank QPSC unit QNB Finance Ltd. priced $115 million of series 264 floating-rate senior notes due April 27, 2025 (Aa3) at par on April 20, according to a notice.

The Regulation S notes were issued out of the bank’s $17.5 billion medium-term note program.

The notes bear interest at Libor plus 250 bps, subject to an interest rate floor of 0%.

The notes are not callable or putable.

The proceeds will be used for general corporate purposes.

Standard Chartered Bank was the dealer for the notes.

The commercial bank’s headquarters are in Doha, Qatar.

Meanwhile, Israel sold $5 billion of 3.8% 40-year notes, according to a press release on Wednesday.

Underwriting the offering were BofA Securities, Deutsche Bank and Goldman Sachs.

While the offering saw demand from over 300 investors from 30 countries, it was aimed primarily at Asian markets. Demand from Asian markets was over $10 billion.

The bonds were issued in response to the projected rise in the government deficit as a result of the coronavirus.

Lukoil taps market

In the CIS, Russia’s Lukoil Securities BV sold $1.5 billion of 3 7/8% 10-year notes (BBB/BBB+) at par, according to a notice.

The Regulation S notes are guaranteed by Lukoil PJSC.

Citigroup and Societe Generale were joint lead managers and active bookrunners. Bank GPB International SA was a joint lead manager and a passive bookrunner.

Lukoil Securities may at any time prior to Feb. 6, 2030 redeem the notes by paying a make-whole premium. After that, Lukoil may redeem the notes at par plus accrued interest.

Proceeds will be used for general corporate purposes.

Lukoil is a Moscow-based oil and gas company.

New deals from Asia

And from Asia, there was a smattering of deals including Qingdao City Construction Investment (Group) Ltd. subsidiary Hong Kong International (Qingdao) Co. Ltd. selling $300 million 3.99% bonds due 2023. And Pingdu State-owned Assets Management Co. Ltd. sold $200 million 5¾% bonds due 2023, according to a notice of listing with the Stock Exchange of Hong Kong Ltd.

The notes are guaranteed by Pingdu Construction Investment Development Co., Ltd.

Joint lead managers and joint bookrunners of the Regulation S deal were Zhongtai International, Industrial Bank Co. Ltd., Hong Kong Branch, and Central Wealth Securities Investment Ltd., with Huaxia Bank Co. Ltd. also acting as a lead manager.

The listing is expected to become effective on Wednesday.

The engineering and construction services company is based in China.

Lebanon unveils reforms

Meanwhile fears are still rampant with some expecting some form of EM debt crisis soon due to the economic travails that have worsened due to the Covid-19 pandemic.

Lebanon approved a package of reforms and requested assistance from the International Monetary Fund as it attempts to reassert some control over an economy that is in a self-described free fall, according to market sources.

An international financial rescue package is urgently needed to backstop the recession and create the conditions for a rebound, while “quick delivery” on reform measures is critical to help restore confidence, according to the Lebanese government’s financial recovery plan executive summary dated April 30.

Part of the plan is that “foreign holders are expected to face significant losses on their holdings of eurobonds,” the summary stated.

The plan involves restructuring its public debt and recapitalizing the country’s banks and institutions. It also includes de-pegging the Lebanese pound from the dollar, reforming the state-run electricity sector and recovering stolen assets.

Formal talks with bondholders are not yet underway, but the restructuring initiative follows on the government’s decision in March to withhold all payments on its $1.2 billion 6 3/8% bonds due March 9, 2020.

© 2015 Prospect News.
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