Emerging Markets: Galaxy Pipeline prices $3.92 billion two-part deal; Persero brings notes

By Rebecca Melvin

New York, Feb. 12 – Issuance in the emerging markets bond primary market was lighter this past week, compared to the week before, as the Chinese New Year holiday got underway on Thursday and heading into a long holiday weekend in observance of Presidents Day in the United States.

So far in 2021, there has been $154.16 billion of emerging markets debt priced in 255 deals, compared to $124.11 billion in 194 deals priced in the same period last year, according to Prospect News’ data.

Energy sector

A pair of large deals with ties to the energy sector made up a big portion of issuance this past week. Galaxy Pipeline Assets Bidco Ltd. priced $3.92 billion of senior secured bonds in two tranches (Aa2//AA). The $1.75 billion tranche of 2.16% bonds due March 2034 priced at par with a spread of 133.8 basis points over Treasuries. And the $2.17 billion of 2.94% bonds due September 2040 priced at par to yield 178 bps over Treasuries. The bond was talked at a tenor of 19 years to 19.5 years, with a weighted average life of 12.5 years to 13.5 years. It was also talked to yield in the area of Treasuries plus 200 bps.

The proceeds of the Rule 144A and Regulation S deal are expected to be used to refinance existing bank financing, to terminate hedging agreements and for transaction costs.

The debt, refinancing and acquisitions entity is based in the United Kingdom and is focused on the Middle East.

Indonesia’s PT Pertamina (Persero) issued $1.9 billion of notes including $1 billion of 1.4% senior notes due 2026 and $900 million of 2.3% senior notes due 2031 on Tuesday. The issuer of the Regulation S and Rule 144A notes is the state-owned oil and gas company of Indonesia, based in Jakarta.

Currently, the timing is good for most issuers and Pertamina specifically. The two tranches of notes just issued carry the lowest coupons of any debt the company currently carries.

Absent of long-term versus short-term, the coupon rate has been generally falling for the company. In 2011, the company issued long-term notes with coupons at 5¼% and 6½%.

And, since then the debt has ranged from a coupon low of 3.1% (in one tranche of last year’s issue) to a high of 6½%, issued as recently as 2018 for some long-dated notes due 2048.

Pertamina managed to sell this week’s notes with Baa2//BBB ratings, consistent with previous and recent issuer ratings levels.

The company got a tweak and was moved to a negative outlook in April last year when Indonesia’s sovereign rating was shifted to negative from stable. The movement was part of a broader shift for various Indonesian state-backed companies.

Away from energy

Away from energy, Indian Railway Finance Corp. Ltd. sold $750 million of 2.8% 10-year senior notes (BBB-/BBB-), according to a company notice.

The Rule 144A and Regulation S bullet notes were sold under the company’s $4 billion global medium-term note program. The program was recently increased from $2 billion.

The notes will be listed on the Singapore Exchange Securities Trading Ltd., India International Exchange (IFSC) Ltd. and International Securities Market of the London Stock Exchange.

The proceeds will be used in accordance with the external commercial borrowing regulations of the Reserve Bank of India.

The issuer is the dedicated market borrowing arm of New Delhi-based Indian Railways.

And on the sovereign side, the Republic of Ivory Coast priced €850 million of notes in two tranches (Ba3//B+) late Monday, including taps of its existing €1 billion of 4 7/8% notes due 2032 and €850 million of 6 5/8% notes due 2048, according to a market source.

The €600 million tranche of 2032 notes priced at 104.538 to yield 4.3%. That was tight compared to initial talk for yield in the area of 4.55%.

The €250 million of 2048 notes price at 111.66 to yield 5¾%, which was tightened from initial price talk in the 6% area.

The combined order books for the two Rule 144A and Regulation S tranches were in excess of €2.8 billion when final guidance was released.

The 2032 notes are listed on the Euronext Dublin and the 2048 notes are listed on Euronext Dublin and Luxembourg Stock Exchange.

Among lenders, First Abu Dhabi Bank PJSC priced deals in two different currencies this past week. The bank priced £400 million of 7/8% notes due December 2025 (expected: Aa3/AA-/AA-) at 99.558 to yield 0.969%, according to term sheet.

Barclays Bank plc, First Abu Dhabi Bank, HSBC Bank plc and Toronto-Dominion Bank were the managers for the Regulation S offering.

The bank also priced €750 million 1/8% five-year senior notes (Aa3/AA-/AA-) at 99.915 to yield 0.142%, or a spread over mid-swaps of 55 bps, according to a syndicate source on Wednesday.

Both deals were issued under the bank’s $15 billion euro medium-term note program.

First Abu Dhabi Bank is a lender operating in the United Arab Emirates.

But Jain International Trading BV skipped another interest payment. The subsidiary of Jain Irrigation Systems Ltd., a Jalgaon, India-based agri-business company, said it will not pay the coupon due Feb. 1 on its 7 1/8% senior notes due 2022 (ISIN: XS1555346995), according to a notice.

The company said it is in discussions with certain of its working capital and term lenders in India and striving to address its liquidity issues.

The issuer did not make coupon payments that were due on this debt on Feb. 1, 2020 or Aug. 1, 2020, and an event of default remains ongoing.

Inflows continue

Fund flows data tracker EPFR reported on Friday that emerging markets bond funds recorded inflows for the 19th consecutive week. In addition, the gap between emerging markets hard-currency bond funds and local-currency ones narrowed during the week as investors continued to pile into China bond funds.

The latest country allocations data for the diversified global emerging markets bond funds shows managers of Europe-based funds taking on more exposure to China and Middle Eastern markets than U.S. domiciled funds, which are putting greater emphasis on Latin America. Overall, however, flows into EPFR-tracked bond funds fell back from the 17-week high they hit coming into February, but were still enough to lift the year-to-date total within striking distance of the $100 billion mark.

© 2015 Prospect News.
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