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EM borrowers push the boundaries despite virus chaos

By Mariam Meskin
17 Dec 2020

As global central banks rushed to prop up the global economy this year as the coronavirus pandemic hit, emerging markets issuers stormed into the bond markets, raising record-breaking levels of debt. A deluge of deals, including green debuts, 50 year and even century bonds, were snapped up by an investor base hungry for high — or least comparatively high — yielding assets. The GlobalCapital emerging markets editorial team selected the year’s best deals, giving consideration to the fundamentals of the trade as well as the context around the deal. After much deliberation, the winners were selected as the standout deals in unprecedented times. Congratulations to those involved.


Arab Republic of Egypt

$750m 5.25% 2025 green bond

Citigroup, Crédit Agricole, Deutsche Bank, HSBC

Egypt enhanced its status as a financial markets trailblazer by issuing the first sovereign green bond from the Middle East and North Africa.

When the pandemic began, green financing took a back seat for many issuers; the need to raise cash quickly took priority. Egypt puts its plans for a debut green bond on hold and issued a $5bn conventional deal in May that attracted $21bn of demand.

But Egypt continued to prepare for the green bond and brought it to market in September, weeks after signing its debut syndicated loan.

The five year deal won a $3bn book, diversifying Egypt’s investor base, and was increased by $250m. It was priced with a 50bp lower yield than Egypt had paid for its four year tranche in May. The issuer also priced further through fair value than ever before: 12.5bp below its curve.

The transaction has inspired other sovereigns across the region to follow — experts predict an increase in sovereign green and sustainability-linked issuance in 2021.


First Bank of Nigeria

$350m 8.625% 2025

Citigroup, Renaissance Capital, Standard Chartered

African banks were absent from the Eurobond market for most of 2020, though experts say they have a “structural need” for dollar debt. Many relied on the official sector for funding. The first to break the hiatus was First Bank of Nigeria, with a $350m deal in October.

It was not an easy time. Nigeria was experiencing civil unrest in protest at police brutality.

Nevertheless, no other African bank managed to achieve what FNB did this year.

Solid demand enabled the bond’s initial price thoughts of 9% to be tightened to 8.625%, while it was increased by $50m.

Although the Nigerian economy had been weakened by the pandemic and the sharp fall in oil prices, investors liked the growth in FNB’s digital payments network over the past year.

The Nigerian government is now being touted as one of the sub‑Saharan African sovereigns that could enter the international bond market in 2021.


Republic of Peru

$1bn 1.862% 2032, $2bn 2.78% 2060, $1bn 3.23% 2121

BBVA, Citigroup, Goldman Sachs, Banco Itaú, Morgan Stanley

Peru’s $4bn three tranche issue in November — including Latin America’s fourth century bond — was testament to its quick reactions to market sentiment and its reputation as an issuer, built up over several years.

With markets on fire after the US elections and coronavirus vaccine news, Peru found a narrow window just before Thanksgiving and was handsomely rewarded with pricing that looked much tighter than peers.

Most remarkable was that Peru achieved this days after installing its third president in two weeks. Political turbulence rocked the country, but not investors’ faith in its macroeconomic management.

Peru is a rare dollar issuer, having kept one of LatAm’s lowest debt ratios and reduced hard currency exposure. This gave it plenty of space to raise large sums from international investors, despite being among the countries in the world worst hit by coronavirus.

The deal vindicated Peru’s tactic of issuing shorter dated debt in April when curves were steep and spreads were higher, before pouncing on flat curves and all-time low rates to lengthen its maturity curve later in the year.


Saudi Aramco

$8bn bond: $500m 1.25% 2023, $1bn 1.625% 2025, $2bn 2.25% 2030, $2.25bn 3.25% 2050, $2.25bn 3.5% 2070 

Citigroup, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, NCB Capital

Saudi Aramco became in November only the second Gulf issuer to have issued a 50 year bond, thanks to investors’ ravenous appetite for one of the highest rated corporate credits in emerging markets.

Despite the precipitous drop in oil prices making life difficult for the world’s largest oil company, including a downgrade of its rating outlook, Aramco proved its credentials with investors when they ploughed into the 50 year, in one of the first emerging market bond issues after the US presidential elections.

Though Aramco may have left a bit on the table for investors, market participants hailed the deal as exceptional.

That it was only seven months since Aramco’s international bond debut impressed investors and bankers still more. Only four CEEMEA sovereigns have issued 50 year bonds before — let alone companies.

By Mariam Meskin
17 Dec 2020