Emerging markets: Mexico, Guatemala, Hungary price large deals; Korea banks tap market

By Rebecca Melvin

New York, April 24 – Primary activity in the emerging markets debt market picked up this past week, even as fund outflows resumed in the week ending April 22, after a one-week reprieve of inflows, according to Prospect News’ data and market sources.

A few high-profile sovereigns successfully priced multi-tranche mega deals, while Korea’s Kookmin Bank priced a benchmark of notes earmarked for loans to companies hurt by the Covid-19 pandemic.

There were a number of sizable corporate deals for China as well as a smattering of company deals for other parts of Asia, while the corporate space for Latin America, the Middle East and Africa and Central and Emerging Europe remained largely quiet.

Sovereigns active

Several multi-tranche deals priced, including those from Mexico, Guatemala and the Hungary.

On Tuesday, Guatemala placed $1.2 billion of eurobonds in two parts, including $500 million 5 3/8% 12-year bonds and $700 million 6 1/8% 30-year bonds.

The first tranche was structured as a social bond aimed at eligible projects, including measures to respond to the effects of the coronavirus Covid-19. The second tranche is part of the financing sources of the General Budget of Revenues and Expenditures of the State for the fiscal year 2020.

BofA Securities Inc. managed the issuance.

The placement saw demand for more than $8.1 billion from 180 investor accounts for both tranches, Guatemala said.

Meanwhile, Mexico priced a mega issue of $6 billion of notes in three tranches on Wednesday. The deal included $1 billion of 3.9% notes due 2025, $2.5 billion of 4¾% notes due 2032 and $2.5 billion of 5% notes due 2051.

The central American sovereign’s 2025 notes priced at 98.993 for a reoffer spread of 375.9 bps over U.S. Treasuries. The 2032 notes priced at 97.764 for a reoffer spread of 437.8 bps over Treasuries; and the 2051 notes priced at 92.6 for a reoffer spread of 427.2 bps over Treasuries.

Other primary activity

In other primary activity, Ecopetrol SA said it planned to issue U.S. dollar-denominated notes next week, with Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Scotia Capital (USA) Inc. acting as bookrunners.

The issue’s proceeds will be used for general corporate purposes, including financing its 2020-2021 investment plan. Hopefully the debt capital markets for Latin America will open up next week when the Bogota, Colombia-based petroleum company plans to issue and then list the notes on the New York Stock Exchange.

On Thursday, Hungary priced €2 billion of foreign currency bonds in two tranches due in six years and 12 years.

The €1 billion tranche of 1 1/8% notes due 2026 priced at 99.116 to yield 1.279%, or a spread of mid-swaps plus 145 bps, and the €1 billion of 1 5/8% notes due 2032 priced at 97.757 to yield 1.835% or a spread over mid-swaps of 180 bps. Both tranches priced 15 bps to 20 bps tight to initial price talk.

Meanwhile, Malaysia’s state-owned oil company Petronas Capital Ltd. issued $6 billion of notes due in 10, 30 and 40 years, guaranteed by Malaysia’s Petroliam Nasional Bhd. The issuance included $2.25 billion of 3½% notes due 2030, $2.75 billion of 4.55% notes due 2050 and $1 billion of 4.8% notes due 2060.

The tranches were issued under the company’s $15 billion global medium-term note program via BofA Securities, Citigroup, HSBC, Maybank and MUFG as bookrunners.

The collapse of global crude oil prices as a result of the social distancing shutdowns that have hurt economies around the world hurts not only oil companies but many emerging markets economies overall.

Argentina was in trouble well before the Covid-19 pandemic. But this past week Corporacion America Airports SA subsidiary Aeropuertos Argentina 2000 SA launched an offer to exchange any and all of its $400 million 6 7/8% senior secured notes due 2027 for newly issued 6 7/8% cash/9 3/8% PIK class I series 2020 additional senior secured notes due 2027, according to a press release.

The airport operator is based in Luxembourg.

New deals from Korea

South Korea’s Kookmin Bank priced $500 million of five-year Covid-19 response sustainability bonds with a 1¾% coupon on Thursday, according to a syndicate source.

The Rule 144A and Regulation S bonds priced at 99.42 to yield 1.872%, or Treasuries plus 150 bps.

The proceeds will be used by the bank to provide loans to support businesses affected by Covid-19 and which satisfy social eligibility criteria of the bank’s sustainable financing framework.

Kookmin Bank is a lender based in Seoul.

Fitch Ratings on Friday said it revised the outlook on Kookmin Bank's long-term issuer default rating to negative from stable and affirmed the IDR at A.

“The negative outlook reflects our expectation that the economic fallout due to measures to contain the coronavirus outbreak in Korea and globally would put mounting pressure on Kookmin's intrinsic creditworthiness over the next two years,” Fitch said in a news release.

Fitch Ratings also revised its outlook on Shinhan Bank's long-term issuer default rating to negative from stable and affirmed the IDR at A, citing the same reasons.

Shinhan Bank is listing $500 million of floating-rate notes due 2025 on the Singapore Stock Exchange, according to a notice on Friday.

These deals followed another Korean lender, Export-Import Bank of Korea, which priced €700 million 0.829% five-year green notes earlier in the week at par to yield 105 bps over mid-swaps, according to a market source.

BNP Paribas, Citigroup, HSBC, Societe Generale and UBS were joint bookrunners of the Regulation S notes.

The proceeds will be used to extend loans to green projects that promote the transition to low-carbon and climate resilient growth.

The Korean lender’s notes are expected to be listed on the Frankfurt Stock Exchange open market.

Among China corporates, China National Travel Service Group Corp. Ltd. subsidiary Sunny Express Enterprises Corp. sold $300 million of 2 5/8% notes (A3) due 2025 and $600 million of 3 1/8% notes due 2030, according to a notice of listing on the Stock Exchange of Hong Kong Ltd. And Lenovo Group Ltd. priced $650 million of 5 7/8% notes due 2025 at par, according to a company announcement.

Lenovo is a technology company based in Beijing, where China National Travel Service Group is also based.

Finally, Singapore-based port operator PSA International Pte. Ltd. priced $650 million 2¼% guaranteed notes due April 30, 2030 at 99.822, according to an offering memorandum.

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