Emerging markets: Teva prices upsized $5 billion equivalent notes: NPC Ukrenergo debuts

By Rebecca Melvin

Concord, N.H., Nov. 5 – The emerging markets primary market continued to tick along at a moderate pace for the first full week of November, with Teva Pharmaceutical Industries Ltd.’s $5 billion equivalent of sustainability-linked senior notes (Ba2/BB-/BB-) in four tranches accounting for a lion’s share of volume.

In all there was $8.42 billion of issuance in 11 deals captured by Prospect News’ data by early Friday. Although another few deals were likely to trickle through. Another deal of note was NPC Ukrenergo PJSC’s debut offering of $825 million five-year guaranteed sustainability-linked green notes. The state-owned operator of Ukraine’s energy system and electricity system priced the green notes (expected ratings: B3//B) at par with a 6 7/8% coupon, which was on top of 6 7/8% guidance and firmer than earlier talk in the 7% area and low 7% area.

In addition, there was a large euro-denominated deal issued by CK Hutchison Europe Finance (21) Ltd., which brought €1 billion of guaranteed notes in two tranches (A2/A/A-) due 2029 and 2033, according to listing notices on Tuesday.

Both tranches will be guaranteed by parent company, CK Hutchison Holdings Ltd.

But at the pace of issuance seen this past week, marking the first of November, the month may not keep pace with even the slowest month of the year so far, according to the data. The slowest month in 2021 so far was August, when $38.79 billion in 89 deals priced. The strongest month was January when $121.26 billion in 213 deals crossed the finish line.

This past week brought a bit of a mixed bag in terms of fund flows, as investors focused on the U.S. Federal Reserve’s policy meeting update on Wednesday and the Bank of England’s policy meeting update on Thursday. The Fed announced the beginning of tapering of its asset purchasing program, and the BofE stood pat on rates and other accommodative measures. In the midst of this news, which also included central bank news from Australia and Norway, overall flows rotated toward equity funds from bond funds, according to a note from data-tracker EPFR.

Flows for EPFR-tracked funds showed investors looking for protection from inflation, with $2 billion allocated to inflation protected bond funds, and exposure to equities. Equity funds, which saw a collective inflow of $26 billion. That outshined overall bond fund flows, which saw $7.9 billion enter the space.

That $7.9 billion was less than half the $18 billion weekly average that EPFR-tracked bond funds maintained during the first half of the year, EPFR reported in its weekly Global Navigator note on Friday.

Among emerging markets bond funds, China bond funds pulled in more than $400 million despite the troubles of that nation’s property developers, and Turkey bond funds saw their longest run of inflows since the third quarter of 2017 come to an end after the central bank there cut interest rates by 200 basis points last month, according to EPFR.

In further tribute to the central bank theme, European regional bond funds enjoyed another week of sold inflows as the European Central Bank made a point that it does not expect to cut or raise rates soon, EPFR pointed out.

Looking ahead, Hungary’s MVM Energetika Zartkoruen Mukodo Reszvenytarsasag selected bookrunners and scheduled investor meetings starting on Thursday for a proposed euro-denominated offering of senior unsecured notes due in six or seven years. The vertically integrated energy group is 100% state-owned by Hungary. And People’s Republic of China through its Ministry of Finance plans to price euro-denominated senior bonds (A1) in three series, according to a preliminary offering circular on Friday.

The sovereign has mandated Bank of China, Bank of Communications, China International Capital Corp., BofA Securities, Credit Agricole CIB, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Societe Generale, Standard Chartered Bank and UBS as joint lead managers and joint bookrunners of the Regulation S multi-tranche deal, which will be priced subject to market conditions.

Teva upsizes

Teva priced an upsized $5 billion equivalent of sustainability-linked senior notes (Ba2/BB-/BB-) in four bullet tranches late Tuesday, market sources say.

The deal included

• $1 billion of 5.5-year notes that price at par to yield 4¾%;

• $1 billion of 7.5-year notes that priced at par to yield 5 1/8%;

• €1.1 billion of 5.5-year notes that priced at par to yield 3¾%; and

• €1.5 billion of 8.5-year notes that priced at par to yield 4 3/8%.

The overall deal size increased from $4 billion equivalent.

The notes in all tranches priced at the tight ends of final talk.

The $4 billion equivalent of notes was heard to have been playing to $14 billion equivalent of demand, skewed to the euro-denominated tranches, at close of books.

Allocations across all four tranches were expected to amount to 20% to 30% of order sizes.

For the longer-dated dollar notes there will be a coupon step-up in 2026 if Teva fails to meet its sustainability targets. The rate will step up 12.5 bps separately based on each of the following sustainable targets: a regulatory submissions target, a product volume target or an emission reduction target.

For the shorter-dated notes a separate premium would be paid at maturity or redemption of 0.15% of the principal amount for each of the same three targets.

All four series have make-whole call options and then par calls a number of months before their maturities.

Proceeds will be used to fund a tender offer for up to $3.5 billion of notes, to pay fees and expenses and to fund the repayment of outstanding debt upon maturity or earlier redemption. If there are any proceeds left over, they will be applied to general corporate purposes.

The pharmaceutical company is based in Tel Aviv.

Paul Harris contributed to this article.

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