Emerging Markets: Croatia, Serbia price large euro deals; Saudi Arabia brings dual tranches

By Rebecca Melvin

New York, Feb. 26 – Two large euro deals from Central and Eastern Europe sovereigns garnered attention this past week – one in which volume levels continued to remain light, according to Prospect News’ data.

Republic of Croatia priced €2 billion of notes in dual tranches due in 12 years and 20 years on Thursday, and the Republic of Serbia priced €1 billion of 1.65% notes due 2033.

Croatia’s €1 billion of 1 1/8% notes due 2033 priced at 98.538 to yield 1.257%, or mid-swaps plus 105 basis points. Pricing was tight to spread talk, which was guided to the 115 bps area over mid-swaps and from initial talk at the 135 bps area over mid-swaps.

The sovereign’s €1 billion of 1¾% notes due 2041 priced at 99.366 to yield 1.788%, or 135 bps over mid-swaps. The pricing was tight to spread talk guided to the 145 bps area over mid-swaps from initial talk in the area of 165 bps mid-swaps.

JPMorgan, Morgan Stanley, Societe Generale and UniCredit/Zagrebacka banka were mandated as joint lead bookrunners and joint lead managers of the Regulation S deal, and OTP Bank was also mandated as a joint lead manager.

The combined order book was more than €5.5 billion at the time guidance was released.

The notes are expected to be listed on the Luxembourg Stock Exchange’s regulated market.

Serbia’s €1 billion of 1.65% notes due 2033 were reoffered at 97.131 for a yield of 1.92%, or a spread over mid-swaps of 180 bps and over Bunds of 222 bps. Pricing was tighter than guidance of mid-swaps plus 190 bps to 195 bps and from initial talk at mid-swaps plus 210 bps to 215 bps.

The order books stood at more than €3.2 billion at the time of the launch.

BNP Paribas, Citigroup, Deutsche Bank and Erste Group are joint bookrunners of the Rule 144A and Regulation S deal.

Elsewhere, new issuance remained light among China issuers, although there were a few interesting deals that popped up. According to a recent Fitch Ratings report China is expected to have a very healthy 8% growth, but almost all emerging markets countries are expected to recover in 2021 after a very poor performance in 2020.

China resumes activity

China Aoyuan Group Ltd. sold $350 million of 5.88% senior notes due March 1, 2027, and China’s Guangzhou R&F Properties Co., Ltd. unit Easy Tactic Ltd. priced $325 million 11 5/8% notes due 2024 at par.

The China Aoyuan Group notes priced at 99.651. The notes can be called at any time at par plus a premium. After March 1, 2025, the notes can be redeemed at 102 and after March 1, 2026 at 101.

Proceeds from the Regulation S issue will be used to refinance existing offshore debt.

China Aoyuan is real estate developer based in Guangzhou, China.

Easy Tactic priced $325 million 11 5/8% notes due 2024 at par, according to a notice.

The notes (//B+) are guaranteed by Guangzhou R&F, its R&F Properties (HK) Co. Ltd. subsidiary and some other subsidiaries.

The notes are non-callable until Sept. 3, 2023 and then provisionally callable for six months at 105 and accrued interest and after six months beginning on March 3, 2024 at 102.5 and accrued interest.

J.P. Morgan Securities plc, Credit Suisse (Hong Kong) Ltd., China Citic Bank International Ltd. and HeungKong Securities Ltd. are bookrunners for the Regulation S offering.

Proceeds will be used for refinancing medium- to long-term debt set to mature within one year.

Guangzhou R&F is a property developer based in Guangzhou, China.

With full-year GDP forecasts for China running around 8%, the country is central – along with the stimulus-driven U.S. economy – to the global reflation story that has been a feature of markets since the fourth quarter of 2020, according to EPFR data tracker.

“Between them, US, China and global equity funds accounted for over 90% of the week’s headline number, an inflow of $46 billion, for all EPFR-tracked equity funds,” the firm’s weekly brief stated.

Both China and all emerging markets equity funds posted their second largest weekly inflow since EPFR started tracked them, with the latter falling just short of the mark set during the first week of third quarter of 2015 when Chinese authorities were wrestling with a major sell-off in their domestic equity market. Record retail commitments to China equity funds also lifted the retail number for all emerging markets funds into record-setting territory.

Further west

For the Middle East, the Kingdom of Saudi Arabia acting through the Ministry of Finance has launched €1.5 billion of notes due in three years and nine years.

The €1 billion of three-year notes priced to yield mid-swaps plus 40 bps.

The €500 million nine-year notes priced to yield mid-swaps plus 70 bps.

But final terms were not yet available to Prospect News. The final order book was in excess of €3.75 billion, with a skew toward the three-year tranche.

Fitch said that the return to growth will not be obvious for some time because lingering disruptions will probably cause output to fall in many emerging markets in the first quarter, according to a recent Fitch Solutions report.

Narrowing its emerging markets focus, Fitch moved into infrastructure in the Middle East, where Fitch Ratings reported that many new infrastructure projects will increasingly be looking for private funding, including from international markets.

In addition, First Abu Dhabi Bank PJSC priced $160 million of additional 1.411% trust certificates due Jan. 14, 2026 (expected: Aa3//AA-) in two tranches through FAB Sukuk Co. Ltd., according to a term sheet.

The trust certificates will be consolidated and form a single series with the existing $500 million five-year trust certificates issued on Jan. 14 and $110 million issued on Feb. 24.

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

Representing Africa

Kosmos Energy Ltd. priced an upsized $450 million of 7½% notes due 2028 (B+/B-) on Thursday, according to a news release.

The offering was upsized by $50 million from the initially announced $400 million.

BofA Securities Inc., ING Financial Markets LLC and Standard Chartered Bank led the offering.

The Dallas-based full-cycle deepwater independent oil and gas exploration and production company has key assets in Ghana, Equatorial Guinea, Mauritania and Senegal, in addition to the U.S. Gulf of Mexico. Hence there is an emerging markets aspect to the deal, which was marketed to both high-yield and emerging markets accounts, a trader said.

Kosmos Energy plans to use proceeds from the Rule 144A and Regulation S notes sale to repay debt under its revolver and commercial debt facilities and for general corporate purposes.

Subcontinent brings deals

India’s Network i2i Ltd. sold $500 million of 3.975% subordinated perpetual securities (/BB/BB) on Thursday, according to a notice.

The notes are guaranteed by Bharti Airtel Ltd.

Bharti Airtel is a mobile telecommunications company based in New Delhi.

India Green Power Holdings priced $460 million of 4% six-year secured notes, according to a notice.

HSBC Bank, USA NA is the principal paying agent, and Barclays Bank plc, the Hongkong and Shanghai Banking Corp. Ltd. and J.P. Morgan Securities plc are lead managers and bookrunners.

India Green Power is a renewable energy business.

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