Emerging Markets: Uzbekistan, Benin price notes; Korea, Russia gas companies tap primary

By Rebecca Melvin

Concord, N.H., July 16 – Issuance in the emerging markets bond market remained fairly light this past week, according to Prospect News’ data.

There were new deals for two sovereign issuers. The government of Uzbekistan priced two tranches of senior notes, which were denominated in U.S. dollars and Uzbek som. And the Republic of Benin priced €500 million of 4.95% sustainability bonds due 2035 (expected ratings: B1/B+).

Among corporate issuers, there was a pair of gas companies that tapped the international market.

Korea Gas Corp. has issued $800 million of senior notes in two tranches (Aa2/AA/AA-), according to a listing notice on Tuesday, and PJSC Gazprom subsidiary Gaz Finance plc priced €1 billion of 3½% loan participation notes due 2031.

Uzbekistan priced a $635 million tranche of 3.9% 10-year notes at 99.986 for a yield spread over Treasuries of 255 basis points.

The UZS 2.5 trillion tranche of 14% three-year green notes priced at par.

Pricing was set below initial talk and guidance. The dollar bonds were guided to 4 1/8% yield after initial talk at 4¼% to 4 3/8% yield. The local currency bonds were guided to 14¼% to 14½% from initial talk of a 14½% yield, according to the finance ministry.

The proceeds will be used to finance sustainable development goals and to cover the state budget deficit.

Both tranches have an expected S&P rating of BB-.

Benin priced €500 million of 4.95% sustainability bonds due 2035 at 97.333 to yield 5¼%, or plus 511.1 bps spread over mid-swaps, according to a pricing term sheet.

The notes, which were talked at 12.5-year to 15-year weighted average life, have a 12.5-year weighted average life and will be issued on July 22.

The net proceeds are intended to be used to finance or refinance eligible sustainability development goal expenditures.

Korea Gas issued $800 million of senior notes in two tranches (Aa2/AA/AA-), according to a listing notice on Tuesday.

The Regulation S and Rule 144A notes are issued under the company’s $11 billion global medium-term note program (//AA-).

The first tranche is $450 million of 1 1/8% senior notes due July 13, 2026.

Additionally, a tranche of $350 million of 2% senior unsecured notes due July 13, 2031.

Gazprom priced €1 billion of 3½% loan participation notes due 2031, series 9 notes. The proceeds of the Rule 144A and Regulation S offering will be used to finance a loan to Gazprom. The proceeds of the loan to Gazprom will be used for general corporate purposes.

Elsewhere, Mexico’s CIBanco SA priced $600 million of 4 3/8% notes due July 22, 2031 to yield Treasuries plus 312.5 bps, according to a market source on Friday.

Initial price talk was in the Treasuries plus 325 bps area.

BBVA, Goldman Sachs, JPMorgan and Santander were the bookrunners.

The bank is based in Mexico City.

In the supranational space, African Development Bank priced what appeared to be the week’s largest deal. ADB brought $2.75 billion of 7/8% global notes due July 22, 2026 to yield mid-swaps plus 1 bp, according to a market source.

Pricing was tighter than guidance of mid-swaps plus 2 bps and initial price talk in the mid-swaps plus 3 bps area.

BofA Securities Inc., Citigroup, Deutsche Bank, Nomura and Wells Fargo Securities were bookrunners of the issue for the multilateral development bank based in Abidjan, Ivory Coast.

Among Asia’s issuers, China’s Minmetals Land Ltd. priced $300 million of 4.95% senior guaranteed bonds at par, according to a company announcement.

As previously reported, the proceeds will be used to refinance existing debt under the company’s sustainable finance framework.

They will be issued through British Virgin Islands wholly owned subsidiary Expand Lead Ltd. and guaranteed by the parent company.

Minmetals Land is a real estate development company based in Hong Kong. Its ultimate controlling shareholder is China Minmetals Corp., a state-owned enterprise.

Hongkong Land Finance (Cayman Islands) Co. Ltd. priced $500 million of 2¼% notes (A) due July 15, 2031, according to a listing notice on Tuesday.

The notes are issued under the company’s upsized $7 billion global medium-term note program and guaranteed by Hongkong Land Co. Ltd.

According to S&P Global Ratings, the company plans to use the proceeds to fund eligible projects in accordance with its green financing framework.

The listing is expected to become effective July 16.

The issuer is a property development group.

Fund flows retreat again

Fund flows into emerging bond funds declined for the second straight week during the second week of July, with bond fund flows overall falling back to their lowest level since the week ending March 10, according to EPFR Global Navigator.

The data-tracker’s weekly note attributed the drop in flows to inflation worries after the U.S. core inflation reading for June came in at its highest in nearly two decades.

The Consumer Price Index jumped by 5.4% in the year through June, the Labor Department said on Tuesday.

It was the largest year-over-year increase since 2008 and provoked by revved up prices for used cars, hotel stays and restaurant meals.

But many expect that inflation will cool as the U.S. economy moves past the reopening period following Covid-19 lockdowns.

EPFR said that a recent preference of investors for hard currency funds reversed, with local currency emerging markets funds “pulling in seven times the amount of money committed to hard currency funds.”

China bond funds reached a four-week high however, and South Africa bond funds took in more than $100 million despite resurging violence tied in the country sparked by the arrest of ex-president Jacob Zuma.

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