Emerging market bond deals of the year
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Emerging Markets

Emerging market bond deals of the year

Aramco company logo on a website with blurry stock market develo

Having weathered the turmoil and travails of 2020, emerging market issuers found a new set of challenges waiting for them in 2021. Inflation became almost as much of a concern as infection, and the phrase “taper tantrum” reared its ugly head once again. But supply rolled on regardless, as borrowers from all corners of the market priced debuts, broke records and claimed market firsts. In a year not short of stellar transactions, GlobalCapital’s emerging markets editorial team have picked the standout deals of 2021. As always, the selection takes into consideration not just the deals’ basic terms, but also the context and wider environment. The backdrop can be more important than basis points


The Republic of Benin

€700m 4.875% 2030, €300m 6.875% 2052

Citigroup and Société Générale

Bankers hoped that 2021 would end a drought of high yield sovereigns, which had persisted through most of the previous year. They were not disappointed, and it was Benin that led the way. After a solid but unremarkable debut in 2019, the Republic of Benin returned to market with something much more ambitious.

Shooting out of the blocks in the first week of the year, the borrower was not just the first African credit but one of the first CEEMEA names to test demand. Benin marketed a euro benchmark 11 year bond in connection with a tender of its 2019 debut, and said it would explore interest in a long dated note. The interest was there, and led to the sovereign pushing its curve all the way out to 2052.

A €1bn dual tranche euro deal with minimal new issue premium for a small single-B rated west African sovereign is a strong result. But printing a 31 year note in euros — typically a short-dated market, especially for high yield names — ensured the trade stood out, even amid the wave of high yield sovereign names that followed Benin’s lead.


Saudi Aramco 

$1bn 0.946% 2024, $2bn 1.602% 2026, $3bn 2.694% 2031

Alinma Investment Co, Al Rajhi Capital, BNP Paribas, Citi, First Abu Dhabi Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, NCB Capital, Riyad Capital, SMBC Nikko and Standard Chartered

In 2020, Saudi Aramco won corporate bond of the year when it became one of only a handful of CEEMEA names to price a 50 year deal. In 2021, it earned a second consecutive win with a monolithic trade that stood out for its colossal size rather than its maturity. Aramco landed the biggest corporate sukuk of all time, pricing a $6bn deal across three tranches.

Almost as impressive as the size was the aggressive pricing, made possible by the largest order book ever for a sukuk — a whopping $60bn. Pent-up demand from Shariah-compliant buyers helped bring pricing inside of fair value, but conventional accounts worldwide also poured into the deal.

On the one hand, Aramco has a profile and stature unmatched across CEEMEA, which allows it to price deals that could be characterised as unique. On the other, the sheer volume of appetite from across the globe makes a strong argument that sukuk has become a global market.


Kuveyt Türk

$350m 6.125% 2031

Bank ABC, Citigroup, Dubai Islamic Bank, Emirates NBD Capital, HSBC and KFH Capital

Sometimes bank finance deals pale in comparison when placed alongside those for companies or governments. Bank capital deals are even less likely to set pulses racing. But Kuveyt Türk’s $350m 10 year deal was a perfect example of the progress made across Islamic finance and sustainability.

The borrower was enticed back to the sukuk market for a tier two capital deal, making it Kuveyt’s inaugural tier two sukuk. But the transaction was also the first ever tier two Islamic deal with an ESG stamp — an amount equal to the deal’s net proceeds will go towards green and social projects.

Demand was never in doubt — the deal drew a $4bn order book to push oversubscription into double figures. Kuveyt was able to boast a market first, and the tightest pricing on a Turkish tier two deal since 2017.



$364m blue bond as part of debt restructuring 

Citi (ESG structuring advisor to Belize) and Credit Suisse (blue bond arranger)

In an unprecedented year for ESG debt issuance in Latin America, Belize’s blue bond restructuring stood out for combining financial engineering and the appetite for ESG financing to improve the country’s debilitating debt burden and channel funding to marine conservation.

Four restructurings in 15 years had failed to substantially reduce Belize’s debt levels, and the sovereign’s bond market saga looked set to continue until The Nature Conservancy (TNC) became involved with its Blue Bonds for Conservation debt swap programme.

A subsidiary of TNC proposed to issue a bond on Belize’s behalf that allowed the sovereign to repurchase its only international bond at 55 cents on the dollar. In return, Belize committed to funding an endowment fund for marine conservation. Bondholders agreed, eager to show their support for innovative ESG initiatives, and Belize thus cut its debt by around 12% of GDP.

The deal harnessed the power of ESG, both to clinch bondholder support and to attract US Development Finance Corp (DFC), which guaranteed the bond — lowering the interest rate for Belize. The DFC estimates $180m will be channelled to marine conservation projects because of the deal.

Rarely, if ever, has an issuer gained such a substantial benefit from issuing a thematic bond. Moreover, Belize’s trade is likely to encourage copycat trades


Braskem Idesa 

$1.2bn 6.99% February 2032 sustainability-linked bond

Crédit Agricole, Deutsche Bank, Itaú and Morgan Stanley

Mexican polyethylene producer Braskem Idesa sold a sustainability-linked bond in October that had all the ingredients of a classic emerging markets corporate financing.

First there was the credit turnaround, overcoming political risk. Since its debut international bond in 2019, Braskem Idesa had endured a turbulent time, as Mexican president Andrés Manuel López Obrador argued that the issuer’s ethane supply contract with Pemex represented an opportunity cost for the state-owned company. Yet in September Braskem Idesa settled the debate by amending its agreement with Pemex. Moreover, it is now sourcing ethane away from Pemex, reducing political risk.

Then came the capital structure transformation, with a bond and loan combination used to refinance $1.3bn of project finance debt that rating agencies had described as “restrictive”.

Execution was also impressive. By October, primary markets were not smooth sailing, and B+/B+ rated Braskem Idesa announced investor meetings on a particularly tricky Monday, October 11. This bravery was rewarded: it was ready to pounce on far improved conditions three days later, on Thursday, October 14. A $3.8bn book brought strong price tension and a $1.2bn deal at the high end of size expectations.

Despite most Q4 EM new issues trading poorly in secondary, Braskem Idesa’s 2032s were up from a re-offer price of 99.94 to almost 103 by mid-November — a strong performance, but not excessively so.

The sustainability KPIs were also notable, as Braskem Idesa set an absolute emissions reduction target, rather than emissions per unit of production or per $1m of revenue as on most SLBs.


Steven Gilmore
Oliver West
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