Morning Commentary: EM debt little changed; Mexico City Airport bonds edge upward

By Rebecca Melvin

New York, Dec. 10 – Emerging markets debt was mostly flat but toggling with the broader markets early Monday as U.S. Treasuries started the session weaker but firmed and equities continued to slide. Commodities were also under pressure as market volatility spiked.

Global investors reacted to news that British prime minister Theresa May has delayed a parliamentary vote on her government’s Brexit bill, a decision that throws more uncertainty on global growth prospects next year. May said the decision was based on concerns regarding how to manage Northern Ireland’s border with the Republic of Ireland.

Meanwhile, Mexico City Airport bonds recouped slightly on reports that bondholders are demanding that the government guarantee payments on outstanding notes and use passenger fees from other airports as collateral.

Last week the $6 billion of bonds jumped on Tuesday after the Mexican government announced a buyback for up to $1.8 billion of the bonds, asking holders for submission of the four different series of notes through a modified Dutch auction for $900 to $1,000 for every $1,000 in principal.

Mexico’s new president, Andres Manuel Lopez Obrador, announced in October that he did not plan to complete the airport for which the bonds had already been issued.

Mexico City Airport’s 5½% bonds due 2047 were around 82.75 on Monday, a bit below the level to which they rose last week but still much higher than a week ago when this issue was about 74.85.

From Asia, Citic Securities Co. Ltd. priced $300 million of 4¼% notes due 2021. Proceeds of the BBB-rated notes of the Hong Kong-based conglomerate will be used to on-lend to members of the Citic group for general corporate purposes, including business operations, adjustments to corporate debt structure, working capital and project finance purposes.

In addition, Shimao Property Holdings Ltd. is proposing to price an add-on of notes to its $250 million of 6 3/8% notes due 2021 issued on Oct. 15.

Proceeds of the Regulation S offering will be used to refinance existing debt and for business development and other general corporate purposes of the Hong Kong-based real estate development company.

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