Emerging Markets: Romania, Mexico tap sovereign debt market; Jardine Matheson notable issuer

By Rebecca Melvin

Concord, N.H., April 9 – Something of a hush fell over the emerging markets debt market this past week, which started as a holiday in the many countries that observe Easter Monday. It was also the first full week of April.

There were a pair of sovereign issuers in Romania and Mexico, which issued €3.5 billion and $3.26 billion, respectively. Romania’s deal came in dual tranches, but Mexico’s was a single series. Representing supranational lenders, Asian Development Bank priced $5 billion of 1% five-year notes, and Hong Kong’s Jardine Matheson Holdings Ltd. was a notable corporate issuer, pricing $1.2 billion of bonds. After that, activity dropped off, but there were also some notable local currency debt deals during the week.

Romania, acting through the Ministry of Public Finance, priced €3.5 billion of notes due in 2033 and 2041.

The €2 billion of 2% notes due April 14, 2033 priced at 98.907 to yield mid-swaps plus 195 basis points. Pricing was tight to guidance in the mid-swaps plus 205 bps area and initial talk of the mid-swaps plus 225 bps area.

The €1.5 billion of 2.75% notes due April 14, 2041 priced at 99.651 to yield mid-swaps plus 235 bps. Pricing was tight to guidance in the mid-swaps plus 245 bps area and initial talk of the mid-swaps plus 265 bps area.

BNP Paribas, Citigroup, HSBC, Raiffeisen Bank International, Societe Generale and UniCredit were bookrunners of the Rule 144A and Regulation S deal.

Mexico priced $3,256,899,000 of 4.28% notes due Aug. 14, 2041 at 99.938 to yield 4.285%, according to an FWP filed Wednesday with the Securities and Exchange Commission.

The deal was upsized to $3.26 billion from a previously reported $2.5 billion.

An earlier FWP filing stated that the $3.26 billion includes about $760 million of notes intended to fund the purchase of outstanding preferred tenders under Mexico’s concurrent tender offer for nine series of existing notes. After announcing the tender results, Mexico set the final issue size at $3,256,899,000.

The notes priced at a spread of Treasuries plus 205 bps. Price talk was in the Treasuries plus 240 bps area, according to a market source.

BBVA Securities Inc., BofA Securities Inc., Credit Suisse Securities (USA) LLC and J.P. Morgan Securities LLC are the joint bookrunners.

At the same time, Mexico was tendering for nine series of outstanding notes and taking out a significant chunk of debt.

ADB, which is a regional development bank based in Mandaluyong, Philippines, priced $5 billion of 1% five-year notes at mid-swaps plus 2 bps, or a Treasuries plus 15.25 bps spread.

Initial price talk was in the mid-swaps plus 5 bps area.

BMO Capital Markets Corp., Credit Agricole CIB, Deutsche Bank Securities Inc. and Goldman Sachs & Co. LLC were the bookrunners.

Corporate debt

Among corporate debt, JMH Co. Ltd. issued $800 million of 2½% bonds due 2031 and $400 million of 2 7/8% bonds due 2036 on Friday.

The notes (A1/A+) are guaranteed by parent company Jardine Matheson Holdings.

Hongkong and Shanghai Banking Corp. Ltd., Bank of China (Hong Kong) Ltd., DBS Bank Ltd., Mizuho Securities Asia Ltd., MUFG Securities Asia Ltd. and SMBC Nikko Capital Markets Ltd. are the bookrunners.

Upcoming deals

Activity promised to occur in the upcoming days included that from China Construction Bank Corp. Hong Kong Branch, which is applying to list a $15 billion medium-term note program on the Stock Exchange of Hong Kong Ltd., according to a notice.

The debt issuance program will be in effect for 12 months from April 9.

China Construction Bank (Asia) and Hongkong and Shanghai Banking Corp. Ltd. are the arrangers and dealers of the program, which is expected to become effective on April 12.

The lender is based in Beijing.

Local currency bonds

Meanwhile, there were some notable local currency offerings. Qatar’s QNB Finance Ltd. priced RMB 140 million of 3.18% five-year senior notes (series 336) at par, according to a document of final terms.

The notes (Aa3) are guaranteed by Qatar National Bank QPSC and issued under the bank’s $22.5 billion medium-term note program.

Proceeds will be used for general corporate purposes.

They were listed for trading on the London Stock Exchange’s International Securities Market on Friday.

The commercial bank’s headquarters are in Doha, Qatar.

From Taiwan, Da-Li Development Co. Ltd. priced up to NT$10 billion of five-year secured bonds at par with a 0.55% coupon, according to an announcement.

The notes are guaranteed by Agricultural Bank of Taiwan, and the proceeds will be used to repay a financial institution loan.

Taiwan Cooperative Securities is the underwriter of the transaction, which is the first secured corporate bond issued by Da-Li Development.

The construction and development business is based in Taipei, Taiwan.

Fund flows

Flows to EPFR-tracked bond funds increased for a fourth straight week for the first week of April as yields on the U.S. 10-year Treasury continued to drop back from recent highs – although on Friday, yields moved up again. A move earlier in the week encouraged fixed-income investors to stretch for yield to the benefit of high-yield, total return, Europe and emerging markets bond funds.

Flows to emerging markets bond funds were mostly to ones with hard-currency mandates, according to EPFR data. At the country level, China bond funds extended an inflow streak that has been occurring for more than 11 months. Meanwhile, redemptions from South Africa bond funds were the second largest since the beginning of last year’s third quarter, and Turkey bond funds attracted fresh money for the fourth time in the past five weeks.

According to EPFR’s Cameron Brandt a substantial group of investors continue to position themselves for a higher inflation and the interest rate hikes that could trigger despite the noticeable thaw in risk aversion.

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