Emerging markets marked by a rare issuer and some rare yields

Chicago, May 21 – Emerging markets closed out the week with a couple of notable issues coming out of Turkey, a country that infrequently gets covered in the major currency Regulation S or Rule 144A global markets.

And, also notable for the emerging market week, a few of the deals to settle during the week had yields that broke the 9% barrier, a height not often attained in the sphere.

EM: Turkey

A rare issuer popped up in emerging markets over the week, with some crossover interest from high-yield accounts.

Turkey’s Arcelik AS priced a €350 million green bond during the week with a 3% coupon at par.

The company has €350 million of 3 7/8% notes due later this year, in September.

Those notes, priced in September 2014, represent the last time Prospect News caught the issuer in the Regulation S market.

Fitch Ratings viewed the issue as a refinancing transaction, and a successful one at that.

The agency noted that the company has already refinanced its local currency debt that was due in 2021.

Another Turkish issuer settled notes earlier in the week, with Limak Iskenderun Uluslararasi Liman Isletmeciligi AS (LimakPort) issuing $370 million of 9½% senior secured notes on Tuesday.

Fitch noted that the nearly punitive coupon on that issue came higher than expected when rating the notes (//BB-).

The agency kept the rating in spite of a weaker debt service coverage ratio, compared with expectations.

The two Turkish issues come on the heels of a $375 million issue from Pegasus Airlines, with a 9¼% coupon at the beginning of May, meaning the various companies have priced three notes in the international markets at under $400 million each.

9%-plus club

High yields were not limited to the LimakPort deal, however.

China’s Hilong Holding Ltd. settled new notes during the week that came with a 9¾% coupon.

The issuer announced in March that it was planning to restructure its 7¼% senior notes due June 22, 2020 and its 8¼% senior notes due in September of 2022.

The company announced this week that it had restructured the 2022 notes, but did not mention the 2020 issue.

The company defaulted on the 2020 issue last July, which triggered a cross-default on the 2022 notes.

The company had started an exchange offer for the 2020 notes about two months before the default but failed to get tenders for 80% of the notes, which it needed for the exchange to have been successful.

The oilfield equipment company that is based in Shanghai has been working with the court on the defaults.

A Hong Kong property developer, Jiayuan International Group Ltd., sold the most expensive debt of the week.

The company sold $130 million of 11% senior notes that settled early in the week.

And, while the debt is expensive, the issue is a comparative bargain, as the issuer is using the proceeds to refinance debt.

Debt for the company has routinely come north of the 10% mark.

Since December 2018, all of the issues from the company have been over 12%, with the highest coupon hitting 13¾%.

Yields like this are generally rare in emerging markets.

For the last decade, more than half of the issues each quarter have priced with yields under 5%, according to Prospect News data.

In 2021, year to date, only around $6.6 billion of the new issues that have priced in major currencies have come with yields that top 9%. This figure is out of the $335.24 billion of recorded issuance for the year so far.

Funds

Emerging markets equity funds reported net inflows to the week ended May 19 of $491 million, according to the Refinitiv Lipper Fund Flow Report Newsline.

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