Emerging Markets: Chile brings $4 billion green notes; Pakistan sells $1 billion sukuk

By Rebecca Melvin

Concord, N.H., Jan. 28 – The emerging markets bond market saw select deals price this past week as the broader markets continued to be roiled by the prospect of higher rates, pandemic problems and growing concerns surrounding the Russia/Ukraine geopolitical situation.

The Republic of Chile sold $4 billion of green notes in in three tranches (A1/A/A-) on Thursday, according to FWP filings with the Securities and Exchange Commission. And Pakistan priced $1 billion of senior sukuk due in seven years (B3//B-).

The Middle East sovereign sold its trust certificates at par with a 7.95% profit rate, according to a syndicate source on Tuesday.

The benchmark sukuk priced at a spread over Treasuries of 627.8 basis points or mid-swaps plus 626 bps.

Credit Suisse (Singapore) Ltd., Deutsche Bank AG London Branch, Dubai Islamic Bank PJSC and Standard Chartered Bank were the joint lead managers and joint bookrunners of the Rule 144A and Regulation S offering.

Among significant corporate deals, Luxembourg-based Millicom International Cellular SA funded its Guatemala acquisition in the bond market. The telecommunications company’s subsidiary in Guatemala, Comunicaciones Celulares SA, issued a $900 million tranche of 5 1/8% senior notes due 2032 (Ba1//BB+) to pay off the bridge loan it used to take control of Tigo Guatemala.

The deal was initially talked at $750 million of 10-year bonds.

Proceeds from the Rule 144A and Regulation S offering will be used to prepay a portion of its remaining obligations under the bridge facility agreement entered into to complete the acquisition of a 45% stake in the company and the other Tigo operations in Guatemala in November. Following the repayment, $450 million will remain outstanding under the bridge facility.

Millicom is a Luxembourg-based provider of cable and mobile services to customers in Latin America and Africa.

An investment and financing platform in the transportation sector, Xin Yue Co. Ltd., issued $500 million 2.358% senior notes due 2027 (expected: A/A+) guaranteed by Guangdong-Provincial Communications Group Co. Ltd., according to a listing notice Wednesday.

The company based in Guangdong, China, will use proceeds will be used for project construction, refinancing and working capital.

The deals priced amid growing uncertainty that sparked redemptions among some emerging markets bond funds this past week, according to sources, with local currency bond funds particularly at risk.

The Russia/Ukraine situation has gained more attention in recent days as a Russian invasion scenario grows. Russia wants the West to promise that Ukraine will not join its NATO defensive alliance and although the two sides are negotiating, the situation appears to be destabilizing. Russia denies it is planning an invasion, but it has seized Ukrainian territory before and it has an estimated 100,000 troops deployed near its borders.

Ukrainians deposed their pro-Russian president in 2014, and Russia responded by annexing Ukraine’s southern Crimean peninsula and backed separatists who captured large swathes of eastern Ukraine. Russia President Vladimir Putin has threatened “appropriate retaliatory military-technical measures” if what he sees as the West’s aggressive approach continues.

Meanwhile, President Biden says his guess is that Russia will move in. The United States says it knows of Russian plans to boost its forces near Ukraine “on very short notice.” The potential for conflict in Eastern Europe was being evaluated by an enlarging circle of investors and as banks and others weighed in on the situation. BNP Paribas said that it thinks the situation will not escalate into a full-blown conflict but that it will likely persist as a slow-burn scenario.

Chile brings triple tranche

The sovereign sold $1.5 billion 2¾% notes due July 31, 2027, which were priced at 99.94 to yield 2.763%, or a spread over Treasuries of 110 bps.

A $1.5 billion tranche of 3½% notes due Jan. 31, 2034 priced at 99.932 to yield 3.507%, or a spread over Treasuries of 170 bps.

And a $1 billion 4% tranche of notes due Jan. 31, 2052 priced at 99.05 to yield 4.055%, or a spread over Treasuries of 195 bps.

All of the notes feature a make-whole call as well as a par call. The five-year notes are redeemable prior to Dec. 31, 2026 for a make-whole premium of Treasuries plus 20 bps and subsequently at par. The 12-year notes are redeemable prior to Oct. 31, 2033 for a make-whole premium of Treasuries plus 25 bps and then redeemable at par. The 30-year notes are redeemable prior to July 31, 2051 for a make-whole premium of Treasuries plus 30 bps and then redeemable at par.

Citigroup Global Markets Inc., HSBC Securities (USA) Inc., Santander Investment Securities Inc. and Scotia Capital (USA) Inc. are the joint lead managers and joint bookrunners for the offering.

Proceeds from the notes will be used for eligible green expenditures and eligible social expenditures under the republic’s sustainable bond framework.

Application will be made to the London Stock Exchange for the listing of the notes.

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