Emerging Markets: Sovereign market mostly quiet; Indonesia prices yen tranches

By Rebecca Melvin

New York, July 10 – The emerging markets debt market had several interesting new deals price this past week, but the sovereign market was mostly quiet and the market overall showed signs of stress related to the Covid-19 pandemic.

The Republic of Indonesia sold ¥100 billion bonds due 2023, 2025, 2027, 2030 and 2040. It priced ¥50.7 billion of 1.13% three-year bonds; ¥24.3 billion of 1.35% five-year bonds; ¥10.1 billion of 1.48% seven-year bonds; ¥13.4 billion of 1.59% 10-year bonds; and ¥1.5 billion of 1.8% 20-year bonds.

The samurai bond market has been “relatively quiet due the Covid-19 market disruption,” and this was the first sovereign samurai issue in 2020, Indonesia’s Ministry of Finance noted in a news release.

The proceeds will be used to finance Indonesia’s budget deficit, including to fund its Covid-19 relief and recovery efforts.

Romania, acting through the Ministry of Public Finance, was pricing U.S. dollar-denominated long 10-year and long 30-year notes. The 10-year deal was mostly allocated to U.K. accounts, while the 30-year notes were mostly going to U.S. investors, according to a syndicate source on Thursday.

The United Kingdom was accounting for 39% of the 10-year notes followed by the United States with 27%, then Romania with 10% and the rest of the CEE region with 2%. For the 30-year deal, the United States accounted for 37% of the deal, followed by the United Kingdom with 29%, then Asia with 11% and Romania for only 3% of that deal.

Further information on the pricing of the Romania tranches was not available by Prospect News’ deadline.

Fund flows were muted with hard currency bond funds accounting for the bulk of the money that investors steered into emerging markets bond funds. Mixed and investment-grade funds favored those dedicated to sovereign debt, according to EPFR’s Global Navigator weekly update.

EPFR said at the country level fund flows were geared toward Russia bond funds, which climbed to an 18-week high, and South Africa bond funds, which posted a new weekly inflow record.

Investors’ appetite for increased exposure to Russia and South Africa is not shared by managers of the diversified global emerging markets bond funds, and both markets are among those that have seen their average allocation trimmed for the year to date, EPFR’s Cameron Brandt said in the update.

Meanwhile, news hit on Friday that China National Building Material Co. Ltd. has canceled a proposed issue of up to RMB 2 billion of renewable corporate bonds. The issuance, announced earlier this week, would have been the company’s second tranche issued this year for Covid-19 prevention and control. On Feb. 26, the company priced RMB 1 billion of the bonds with a 3.65% coupon. It has obtained regulatory approval to issue up to RMB 10 billion of renewable corporate bonds in multiple tranches. This first tranche has a basic five-year term, extendable every five years for an additional five years.

The state-owned building materials enterprise is based in Beijing.

Among corporate issuers, ZhongAn Online P&C Insurance Co., Ltd. debuted in the international bond market with a $600 million deal of 3 1/8% notes due 2025 that priced at par.

ZhongAn is the largest online insurer in China.

Also of interest this past week was Latvia’s UAB Bite Lietuva’s dual tranche deal of secured notes, including one tranche of fixed-rate notes and one tranche of floating-rate notes, both due in 2026.

The €400 million 4 5/8% fixed-rates notes priced at par. They are non-callable until July 15, 2022, when they become callable at 102.3125, then in 2023 at 101.1563 and in 2024 at par.

Pricing was tight to talk for a coupon in the area of 4¾%.

The €250 million senior floating-rate notes priced at 99.5 to yield Euribor plus 462.5 basis points. They are callable after one year at 101% of par in 2021 and at par in 2022.

The notes were talked at Euribor plus 475 bps at 99.5.

There is a change-of-control put at 101%, subject to conditions.

Lietuva, UAB Teletower, UAB Eurocom, UAB All Media Lithuania, SIA Bite Latvija, SIA Teletowner and SIA All Media Latvia are guarantors of the Rule 144A and Regulation S notes.

The proceeds are being used to repay borrowings in full under the company’s existing credit facilities agreement, to fund a reduction of the share capital of the issuer and related payments and to pay all fees and expenses related to the transactions.

Jordan’s Hikma Pharmaceuticals plc priced $500 million of 3¼% guaranteed notes due July 9, 2025 at 98.862 on Tuesday, according to a notice. Joint lead managers and joint bookrunners for the notes are Citigroup, HSBC, BofA Securities and Mizuho Securities, with Citigroup and HSBC as joint global coordinators.

The proceeds will be used for general corporate purposes.

The notes are guaranteed by Hikma Pharmaceuticals, Al Jazeerah Pharmaceutical Industries Ltd., Arab Pharmaceutical Manufacturing PSC, Eurohealth (USA) Inc., Hikma Farmaceutica (Portugal) SA, Hikma Labs Inc., Hikma Pharma SAE, Hikma Pharmaceuticals International Ltd., Hikma Pharmaceuticals LLC, Hikma Pharmaceuticals USA Inc., Hikma Specialty USA Inc. and West-Ward Columbus Inc.

Brazil’s Vale Overseas Ltd. priced $1.5 billion of 3¾% 10-year notes guaranteed by parent company Vale SA at 99.176 to yield 3.85%, according to an FWP filing with the Securities and Exchange Commission.

The notes were priced with a spread of 317.1 bps over Treasuries.

BB Securities Ltd., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Mizuho Securities USA LLC, MUFG and SMBC Nikko Securities America, Inc. are the joint bookrunners.

Czech Gas Networks Investments Sarl priced €600 million of 1% senior notes due July 16, 2027 at 99.316, according to a notice.

Macau-based gaming and entertainment company Studio City Finance Ltd. priced $1 billion of senior notes in two tranches on Wednesday, according to market sources.

A $500 million tranche of five-year notes priced at par to yield 6%, at the tight end of the 6% to 6 1/8% yield talk.

A $500 million tranche of 7.5-year notes priced at par to yield 6½%, at the tight end of the 6½% to 6 5/8% yield talk.

The deal was heard to have been oversubscribed. However, within hours of the allocations both tranches were trading slightly below issue price at 99½ bid, par offered, according to a New York-based bond trader.

There were the usual bank deals including Philippines’ Metropolitan Bank & Trust, which priced $500 million of 5½-year dollar-denominated senior notes with a fixed coupon of 2 1/8%.

The notes were priced at a spread of 200 bps over Treasuries, after initial price guidance of Treasuries plus 235 bps, according to a press release.

The order book was more than five times oversubscribed with 120 investors, the company said. Orders were allocated predominantly to Asia with 81% and the remaining to Europe, the Middle East and Africa with 19%.

UBS and First Metro Investment Corp. acted as joint global coordinators and bookrunners and MUFG and SMBC Nikko Capital Markets Ltd. as joint lead managers for the Regulation S-only sale.

The company said proceeds will be used to tap longer-term offshore funding, diversify its funding resources and refinance maturing short-term borrowings.

South Korea’s Kookmin Bank priced €500 million of five-year sustainability covered bonds at par on Wednesday with a coupon of 0.052%, according to a syndicate source.

The Regulation S bonds priced at a spread of 40 bps over mid-swaps, which was below initial price thoughts for pricing at mid-swaps plus high 40s bps. Later, the deal was guided to the mid-swaps plus 45 bps area when order books were in excess of €1.6 billion at that time.

BNP Paribas, Citigroup, Credit Agricole CIB, JPMorgan, HSBC and Societe Generale were joint bookrunners of the deal.

And Akbank TAS issued $500 million of 6.8% notes due 2026, according to a notice.

The bank is based in Istanbul and the notes will be listed on Euronext Dublin.

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