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Mexican bank Banorte sold USD500 million of perpetual non-call
10-year debt with demand of around USD2 billion. On 9 July the bank
announced that pricing was set at 8.375%, versus initial price talk
at 8.875%.
Oleoducto Central (Ocensa), a Colombian crude oil pipeline
operator majority owned by Ecopetrol, gained over USD4.2 billion in
peak demand for a USD500 million seven-year deal, priced to yield
4.125%, 366 basis points over US Treasuries. In its statement, the
company reported that over 260 investors were involved. Proceeds
will repay USD500 million of existing debt maturing in May 2021,
"extending the company's debt profile and maintaining its capital
structure at effective cost".
51% state-owned Indonesian oil company PTT is reported by
Reuters to have raised USD700 million for 50 years, the longest
term for a dated Asian corporate bond, paying 3.7% for the deal,
which was priced on 9 July. The transaction was increased from
USD500 million. The report notes that Indonesia raised USD1 billion
of 50-year debt at sovereign level in April, the first state
issuance in Asia at that term.
Philippine issuance has been active, with three new deals in the
week to 10 July:
Port company International Container Terminal Services raised
USD300 million of 5% perpetual debt, shortly after selling USD400
million of 10-year bonds in June yielding 4.8%, which had gained
USD1.85 billion in demand from over 111 accounts, 80% of which were
in Asia according to its statement. The new perpetual sale is
related to a tender for an USD450 million 5.5% outstanding
perpetual debt issue.
In addition, BDO Unibank sold USD600 million of 5.5-year 2026
debt with a 2.125% coupon, which attracted USD2.9 billion in demand
according to a domestic filing, and Metropolitan Bank & Trust
raised USD500 million of 2026 debt at the same coupon.
Tengizchevroil, a joint venture in Kazakstan 50% owned by
Chevron, 25% by Exxon Mobil Kazakhstan and 20% by KazMunayGas which
operates the giant Tengiz field, has mandated banks for a
two-tranche dollar sale.
The Emirate of Sharjah has mandated banks to arrange a benchmark
dollar sale of 30-year debt in Formosa format, targeting Taiwanese
institutional buyers. The issue would be its first in Formosa
format and for a maturity of over 10 years. Sharjah already
targeted domestic Chinese markets in 2018, with a CNY2 billion
issue, with the new operation potentially tapping a new investor
base as well as extending its maturity schedule.
West African telecommunications company Sonatel is arranging a
West African CFA franc issue with support from the Emerging Africa
Infrastructure Fund. It is seeking up to XOF100 billion (USD170
million) of 6.5% 2027 debt, targeting regional pension funds and
other institutional investors. Proceeds will be used to expand its
4G network and improve service platforms, with the company
investing in additional areas such as banking and multimedia
content. The issue is fully underwritten by the Emerging Africa
Infrastructure Fund (EAIF), which is also subscribing for XOF50
billion to underpin the deal. Sonatel is Senegal's leading
telecommunications operator, but also operates in Mali, Guinea
Conakry, Guinea Bissau and Sierra Leone. In all these markets, it
is the largest telecommunications operator, offering fixed line and
mobile telephony, internet, television and mobile money services
within its products. It is 42% owned by the Orange Group.
Equity
China's largest chip manufacturer, SMIC, is conducting the
largest IPO this year, floating its Hong Kong listed shares on the
Shanghai stock exchange. The sale, which started on 7 July, is for
1.685 billion shares at CNY27.46 each, to raise CNY46.28 billion
(USD6.6 billion): after a green-shoe of 1.938 billion shares the
deal could grow to CNY53.2 billion (USD7.59 billion). The issue is
for double the amount proposed in a prior filing. The offering is
the largest Chinese domestic sale since the 2010 offering by
Agriculatural Bank of China.
SMIC is a strategic vehicle for China's efforts to develop
domestic semiconductor capacity. The company raised USD2.25 billion
in May from two state-backed funds, according to Caixin, which also
suggested that the company had been given accelerated approval for
its filing on the STAR market, Shanghai's technology oriented
equivalent of Nasdaq.
China Bohai Bank, headquartered in Tianjin, priced on 9 July the
largest Hong Kong IPO offering in 2020. It sold 2.88 billion shares
at HKD4.80 per share, versus a range of HKD4.75-4.98, raising
HKD13.82 billion (USD1.78 billion). Trading starts on 16 July.
Within the offering, TEDA Investment Holdings, previously the
bank's largest shareholder, cut its stake from 25% to under 20.85%,
while Standard Chartered, which had owned 20%, reduced its holding
to under 16.67%.
Our take
SMIC's deal, the largest flotation this year, and China Bohai's
IPO come against a recent surge in Chinese share prices with
another Chinese firm, technology firm QuantumCtek gaining a
remarkable 1000% on first day trading in Shanghai, a record level
for first day appreciation. It also follows JD.com and NetEase
having raised a total of USD6.6 billion through secondary listings
and placings in Hong Kong last month.
Banorte's successful sale of perpetual debt is a further
positive indicator of the recovery in emerging market conditions,
which is improving the range of banking-sector issuers and
instruments used.
Banorte is a large and strongly-capitalized bank: on 10 July our
Banking Risk specialist Alejandro Duran-Carrete noted that the bank
is the only domestically-owned firm among the six Mexican banks
designated by the National Banking and Securities Commission
(Comisión Nacional Bancaria y de Valores: CNBV) on 9 July as of
domestic strategic importance. As of April 2020, Banorte has the
strongest capital ratio - 19.48% - among this group, comfortably
ahead of the next-best capitalised firm (Santander, with 15.84%),
suggesting that its capital raising is pre-emptive - to address
potential expansion in impairment due to the COVID-19 pandemic -
and to underpin further expansion. The bank's press release simply
described the proceeds as "for general corporate purposes".
Its successful AT1 deal - and the tightly-priced Philippine
offerings - nevertheless both indicate the wider trend described
above. Among recent emerging market bank deals, the most notable in
our view was Akbank's ability to raise a three-times subscribed
USD500 million 6.8% 5.5-year offering, the first Turkish bank bond
sale during the COVID-19 pandemic. CEO Hakan Binbasligil described
the sale as coming in a "challenging period" but noting that "the
markets started to open with the support packages announced, the
easing of the restrictions and other measures", according to his
statement on 1 July.
Within markets that remain volatile, recent supply does suggest
that more banks will be able to access international debt, and that
a wider range of instruments, including capital securities, are
increasingly available for emerging market bank issuers, although
the latter are more likely to involve larger and stronger banks
within the segment. While it may still be premature to suggest that
full market access has been restored for the sector, to the levels
prevailing in the highly-receptive markets in early 2020, the trend
is clearly positive.
Lastly, EIAF's initiative with Sonatel is a risk-positive
development helping the expansion of local capital markets in the
region. EIAF is funded by four governments - the UK, Netherlands,
Switzerland and Sweden - along with African Development Bank, KFW
and FMO together with private sources such as Allianz and Standard
Chartered Bank. The fund is playing an important role in improving
access to capital for regional firms: it recently served as the
anchor investor for Helios Towers' USD750 million bond issue,
initially subscribing for USD300 million of the 7% 5.5-year deal,
when it was first launched with a USD425 million target. Given
strong demand elsewhere, it eventually reduced its participation to
just USD30 million of Helios's upsized issue.
Posted 13 July 2020 by Brian Lawson, Senior Economic and Financial Consultant, Country Risk, IHS Markit