Emerging Markets: UnionBank issues PHP 11 billion digital bonds; Pakistan looks to IMF

By Rebecca Melvin

Concord, N.H., June 3 – The primary market for emerging markets bonds in hard currencies sputtered out this past week even as a smattering of local currency bond offerings were brought to market, according to Prospect News’ data.

The emerging markets bond secondary market remained illiquid and weak. The iShares J.P. Morgan US dollar Emerging Markets Bond EFT was registering negative 15% return year to date as of June 2, according to iShares.com. The iShares security stood at $90.43, which was flat on the day but very close to a 52-week low of $88.53. The 52-week high stands at a distant $112.92.

Union Bank of the Philippines said it raised PHP 11 billion in an inaugural digital bond issue that has a1.5-year maturity and 3¼% coupon.

The successful issue “paves the way for future utilization of distributed ledger/blockchain technology towards more automated and operationally efficient local capital markets,” a Union Bank press release stated.

The digital bonds were issued through the digital registry and digital depository of the Philippine Depository & Trust Corp. using infrastructure powered by #STACS blockchain.

HSBC and Standard Chartered Bank were the joint lead arrangers and bookrunners of the transaction, which had an order book that was 11 times the initial minimum offer size of PHP 1 billion.

“This pioneering issuance serves as a building block in UnionBank’s journey to embrace digitization and positive disruption in the industry. I am confident that this will be recognized globally as a game changing digital initiative in the field of finance,” the lender’s treasurer and head of global markets, Jose Emmanuel Hilado, stated in the release.

Also for Philippines, Vista Land & Lifescapes, Inc., the parent company of Vistamalls Inc., issued a PHP 2 billion add-on to its PHP 4 billion five-year corporate notes announced on March 31.

The investment, real estate and leasing business will use proceeds of the additional notes to refinance existing or maturing obligations of the group and for the other general corporate purposes.

Looking ahead, Manila-based real estate company Robinsons Land Corp. said it plans to issue up to PHP 10 billion of bonds having three to five years’ duration.

The new bond issue, which was approved by Robinsons’ board of directors on May 31, has an over-subscription option of up to PHP 5 billion.

Meanwhile, Quezon City, Philippines-based construction and engineering firm Megawide Construction Corp. is moving forward with a planned offering of up to PHP 3 billion of fixed-rate notes in two series, including notes maturing in 3.5 years and notes maturing in five years.

Pakistan eyed

On the heels of a highly fraught move by Pakistan’s prime minister to hike the nation’s fuel prices last week, Moody’s Investors Service said it changed its outlook on Pakistan to negative from stable and affirmed a B3 local- and foreign-currency issuer and senior unsecured debt ratings.

“The decision to change the outlook to negative is driven by Pakistan’s heightened external vulnerability risk and uncertainty around the sovereign’s ability to secure additional external financing to meet its needs. Moody’s assesses that Pakistan’s external vulnerability risk has been amplified by rising inflation, which puts downward pressure on the current account, the currency and – already thin – foreign exchange reserves, especially in the context of heightened political and social risk,” the agency said in a press release this week.

Pakistan raised its domestic fuel prices for a second time on Friday, as the sovereign that is effectively shut out of the international bond market strives to meet International Monetary Fund requirements for a bailout. Pakistan’s trade deficit is predicted to widen to a record as currency reserves run low. In recent days, Pakistan Finance Minister Miftah Ismail has been quoted saying that several countries including Saudi Arabia are ready to offer help, but first Pakistan has to secure IMF funds. To that end, it has been seeking to secure an IMF staff-level agreement, but no word of a pact has yet been forthcoming.

Pakistan needs about $36 billion to $37 billion of financing for the fiscal year starting June, according to sources. An IMF deal would help secure funds from other sources such as the World Bank and nations including China.

Pakistan priced a $1 billion Islamic bond in January, but its last conventional dollar bond priced last July, according to Prospect News’ data.

Recent pricing

Industrial and Commercial Bank of China Ltd. recently priced multicurrency fixed-rate and floating-rate senior green bonds through four branches, including Hong Kong, London, Dubai and Singapore.

The bonds were issued on Wednesday and included $1.8 billion of green notes in two tranches due 2025, a HK$2 billion tranche of green notes due 2025, €300 million green notes due 2025 and RMB 2 billion green notes due 2024, according to a drawdown circular.

The notes were sold via a battalion of bookrunners. The joint lead managers of the euro-denominated notes alone – which priced from ICBC’s London Branch – were Citigroup Global Markets Ltd., Credit Agricole CIB, HSBC Bank plc, ICBC Standard Bank plc, J.P. Morgan Securities plc, Merrill Lynch (Asia Pacific) Ltd., Societe Generale, Standard Chartered Bank, Bank of China Ltd., London Branch, Bank of Communications Co., Ltd. Hong Kong Branch, Barclays Bank plc, BNP Paribas, China Citic Bank International Ltd., China Construction Bank (Europe) SA, China International Capital Corp. Hong Kong Securities Ltd., China Securities (International) Corporate Finance Co. Ltd., China Zheshang Bank Co., Ltd. (Hong Kong Branch), ICBC International Securities Ltd. and Industrial and Commercial Bank of China (Asia) Ltd.

The joint lead managers of the floating dollar notes, which were sold from the ICBC’s Singapore Branch, included Australia and New Zealand Banking Group Ltd., Bank of China Ltd., Singapore Branch, Bank of Communications Co., Ltd. Hong Kong Branch, Bank of Communications Co., Ltd. Macau Branch, Credit Agricole CIB, DBS Bank Ltd., ICBC International Securities Ltd., Industrial and Commercial Bank of China (Asia) Ltd., Industrial and Commercial Bank of China Ltd., Dubai (DIFC) Branch, Industrial and Commercial Bank of China Ltd., Singapore Branch, Industrial and Commercial Bank of China (Macau) Ltd., Mizuho Securities Asia Ltd., Standard Chartered Bank (Singapore) Ltd., China Construction Bank (Asia) Corp. Ltd., China International Capital Corp. Hong Kong Securities Ltd., China Securities (International) Corporate Finance Co. Ltd., Chiyu Banking Corp. Ltd., Citigroup Global Markets Ltd., CLSA Singapore Pte Ltd., China Minsheng Banking Corp., Ltd., Hong Kong Branch, CMB Wing Lung Bank Ltd., Emirates NBD Bank PJSC, HSBC Ltd., Singapore Branch, Huatai Financial Holdings (Hong Kong) Ltd., MUFG Securities Asia Ltdt., Natixis, Oversea-Chinese Banking Corp. Ltd. and United Overseas Bank Ltd.

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