Emerging Market: Asia dominates issuance; African Development Bank prices; Jain restructures

By Rebecca Melvin

New York, March 19 – Emerging markets bond issuance was light again this past week during which the U.S. Federal Reserve reasserted that it will not be raising rates until its measures for employment and inflation are consistently at or around targets.

Asia issuance made up the lion’s share of the new deals. Bangkok-based investment company, GC Treasury Center Co. Ltd., sold $1.25 billion of 10- and 30-year notes. The tranches included a $700 million issue of 2.98% senior notes due 2031 and a $550 million issue of 4.3% notes due 2051.

Marine fuel trader and supplier Zhejiang Seaport International Co. Ltd. sold $700 million of 1.98% guaranteed bonds due 2026 at 99.787. The notes are guaranteed by Zhejiang Provincial Seaport Investment & Operation Group Co. Ltd.

Bank of China (Hong Kong), Guotai Junan International, OCBC Bank and Standard Chartered Bank were the joint global coordinators for the Regulation S notes and were joined as joint bookrunners and joint lead managers by BNP Paribas, DBS Bank Ltd., Haitong International and ICBC International.

China Zheshang Bank Co., Ltd. (Hong Kong Branch) priced $500 million of 1.1% senior notes due 2024 (BBB-) at 99.909. The notes were issued under the commercial bank’s $2 billion medium-term note program.

Construction services company, Shaoxing Shangyu State-Owned Capital Investment and Operation Co., Ltd., sold $500 million of notes (//BBB-) in two tranches. They included a $300 million issue of 2.95% notes due 2024 and a $200 million issue of 3.55% notes due 2026.

Joint global coordinators are Guotai Junan International, Bank of China, Zhongtai International and Industrial Bank Co. Ltd., Hong Kong Branch.

In addition to the joint global coordinators, the joint bookrunners and joint lead managers are BOSC International, Shanghai Pudong Development Bank, Hong Kong Branch, China International Capital Corp., China Minsheng Banking Corp. Ltd., Hong Kong Branch, CMB Wing Lung Bank Ltd. and CNCB Capital.

The proceeds are earmarked for refinancing, project construction and general corporate purposes, according to a market source.

The notes are expected to be listed on the Stock Exchange of Hong Kong Ltd. effective March 17.

Looking forward, Pan Asia based life insurance group AIA Group Ltd. has established a $12 billion global medium-term note and securities program, according to an announcement.

Citigroup Global Markets Inc. is the arranger for the program and also a dealer along with ANZ, BNP Paribas, Credit Agricole, Deutsche Bank, Goldman Sachs, HSBC, Morgan Stanley, MUFG, Standard Chartered Bank and Wells Fargo Securities.

Under the program, instruments will be issued on a syndicated and non-syndicated basis for up to one year from the March 16 offering circular date.

Listing of the program on the Stock Exchange of Hong Kong Ltd. is expected to become effective on March 17.

Moving beyond Asia, there was a new deal for Africa. African Development Bank sold $2.5 billion of 7/8% notes due March 23, 2026, according to a market source.

The notes priced with a spread of Treasuries plus 13.5 basis points or mid-swaps plus 5 bps, which was tight to expectations that the notes would priced with a spread in the mid-swaps plus 6 bps area.

Barclays, BMO, BNP, Goldman Sachs and Societe Generale are working as managers for the offering.

The issuer is a multilateral development bank based in Abidjan, Ivory Coast.

Emerging markets-focused Petronas Energy Canada Ltd. sold $600 million of 2.112% notes due March 23, 2028 (A2) on Tuesday, according to a market source.

The notes priced with a spread of Treasuries plus 85 bps after being talked in the area of Treasuries plus 125 bps.

BofA Securities Inc. Citigroup, HSBC and Scotiabank were as bookrunners on the notes.

Petronas is a subsidiary of Petroliam Nasional Bhd., which will guarantee the notes, according to Moody’s Investors Service.

The company was previously called Progress Energy Canada Ltd.

The Calgary, Alta.-based company is an energy company.

But there are rumblings of market problems as well.

Jain Irrigation restructuring

Jain International Trading BV, a subsidiary of India’s Jain Irrigation Systems Ltd., announced this past week that it has reached agreement with holders of more than 50.01% of its $200 million of 7 1/8% senior notes due 2022 (ISIN: XS1555346995) to restructure the notes, according to a notice.

The restructuring agreement includes new capital to tide over working capital requirements, remedy certain covenants with its secured lenders, refinance debt and fund a cash tender for some of the original notes.

Holders that are made subject to the terms of the restructuring agreement will receive a consent fee of 0.4% of the principal amount of notes held on the effective date, according to the company’s announcement.

Under the plan, the company is offering to purchase up to $10 million of the notes for cash. Tendered notes in excess of that amount will be accepted on a pro rata basis.

Holders of the remaining notes will be offered new notes in exchange for $150 per $1,000 principal amount of notes being used for a $30 million new first-lien facility. New second-lien series A exchange bonds in a principal amount equal to 200% of holders’ new money commitment and not exceeding $60 million in total will pay 7 1/8% interest accruing from April 1 until they mature March 31, 2026; new senior discount call series B exchange notes for 160% of the cash commitments not exceeding $48 million in total will pay 3.5625% interest until their second anniversary and 7 1/8% until their March 31, 2026 maturity; and new senior step-up call series C bonds in a principal amount equal to their holding of original notes minus the principal amount of series A and series B bonds and cash payment will pay 3.5625% interest until their second anniversary and 7 1/8% until maturity on March 31, 2026.

Holders who do not participate in the new first-lien facility will receive only series C bonds in exchange for the principal amount of original notes.

The new first-lien facility will be underwritten and backstopped by the members of the ad-hoc group of holders of certain original notes for $27.5 million. A cash backstop fee of 2.5% will be paid to the backstop group on the effective date.

Further term sheet information may be obtained from Jain’s financial adviser, Elara Capital (Asia) Private Ltd., at project.crop@elaracapital.com, and information is also available at https://www.nseprimeir.com/Pages/corp_announcment.aspx?value=3cYDU7170mvM600MSHCcM.

As previously reported, the issuer did not make coupon payments that were due on Feb. 1, 2020 or Aug. 1, 2020.

Jain Irrigation is a Jalgaon, India-based agri-business company that manufactures irrigation systems in India.

Flows tepid

When flows from all EPFR-tracked bond funds to emerging markets are tallied year-to-date, more than two-thirds of the $14 billion committed so far has gone to just two markets: China and India, according to data-tracker EPFR Another 20% has gone to Brazil, Indonesia and Mexico.

Massive stimulus spending approved for the United States has raised questions about U.S. issuance to pay for its spending plans, and the direction of yields kept the pressure on emerging markets bond funds this past week. The group eked out modest inflows that stemmed from the continuing demand for exposure to Chinese debt or high-yielding South African and Turkish bonds. But frontier markets bond funds posted their fourth straight outflow, and retail flows were negative for the second week running, the first time that has happened in over 10 months.

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