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Emerging Market Credit Daily Roundup

Turkey issues sukuk – South African Finance Minister fired -Taga reports record losses - Egypt’s Central Bank maintains rates - BNDES overhauls benchmark rates - NDB to issue “Masala bond” - Agrokor is yet to sign deal with creditors

Mar 31, 2017 // 3:53PM

Middle East & Turkey

Turkey issued a six-year, dollar-denominated sukuk with a value of US$1.25bn at 5%, marking the fifth time the sovereign taps the global Islamic bond market since 2012. The sukuk, which drew demand of more than US$3.7bn, sold at U.S. Treasury mid-swaps plus 285 bp, equivalent to a yield of around 4.98%, bankers said.

Turkey’s economy grew at a faster pace than anticipated in the fourth quarter of 2016 as households boosted spending, supporting activity following the failed military coup. GDP expanded 3.5% in the October-to-December period, while the full-year GDP growth was 2.9%.

Abu Dhabi National Energy Co. (Taga) reported its biggest loss on record as the state-controlled power and oil company wrote down the value of oil assets after prices slumped. The loss widened to AED 19 bn last year from AED1.8 bn in 2015. It booked an impairment of AED 16bn, mainly related to its oil and gas assets, “which is a one-time, non-cash charge” that has no impact on its ability to repay debt, the company said.

Al Ahli Bank of Kuwait (ABK) completed a maiden US$500mn senior unsecured bond issue from its recently established US$1.5bn Euro Medium-Term Note (EMTN) programme. This is the debut bond issue for ABK and the first since its acquisition of Piraeus Bank – Egypt in 2015. It is jointly lead and arranged by Citibank, HSBC and National Bank of Abu Dhabi.

Africa

Nigeria got around $3bn of orders for its $500mn of notes, according to Bloomberg. High demand for the deal, a tap of an existing $1 billion bond due in 2032, allowed bookrunners Citigroup Inc. and Standard Chartered Plc to price it with a 7.5% after initially offering 7.8%.

Egypt's Central Bank kept its key interest rates unchanged after a Monetary Policy Committee, the lender announced in a statement. The bank kept its overnight deposit rate at 14.75% and its overnight lending rate at 15.75%, for the fourth consecutive time.  

The African Development Bank has disbursed a US$5000mn loan to Egypt, Reuters reported.  The disbursal, the second of three expected loan tranches from the bank to Egypt, came into effect on Thursday and the funds would be received early next week. Egypt has been negotiating billions of dollars in aid from various lenders to help revive its economy, battered by political and economic upheaval since a 2011 uprising.

South African President Jacob Zuma's decision to dismiss Finance Minister Pravin Gordhan has had an impacted in the country’s performance in the international markets. The yield on the country's benchmark 2026 issue jumped 20 bp to 4.710%, while the cost of insuring South African government debt against default hit the highest level in 15 weeks on Friday. Five-year credit default swaps (CDS) jumped 24 bps to 223 bps from Thursday's close of 199 bps, according to data provider IHS Markit

South Africa’s Central Bank announced that it would keep its interest rates on hold. The central bank has now held its benchmark interest rate at 7% for an entire year, though it has previously said it could consider a further rate hike should inflation rise further. The recent strength of the rand has helped the country’s inflation rate fall back toward the top end of the bank’s target range, though the currency’s rapid depreciation this week has highlighted the fragility of the move.

Asia

New Development Bank (NDB) is set to raise between US$300mn to US$500mn through a “Masala Bond” sale. The profits of this transaction will be used to finance different infrastructure projects in India, NDB president KV Kamath announced. The Indian lender expects to increase their exposure to infrastructure projects by US$700mn this year.

Tewoo Group issued international bonds for US$200mn maturing in 2022 with a 5.5% coupon. Bonds were sold at a price of 99.175% with an initial yield of 5.77%.  The bookrunners for this transaction were:  AMTD Asset Management Limited, Bank of China, Barclays, CITIC Securities International, Guotai JunanSecurities, Wing Lung.

Indonesia Eximbank issued international bonds for US$500mn maturing in 2024 with a 3.875% coupon. Bonds were sold at a price of 99.848% with an initial yield of 3.93%.  The bookrunners for the deal were: HSBC, Mitsubishi UFJ Financial Group, OCBC

Latin America

Venezuela’s supreme court, which is controlled by President Nicolás Maduro’s socialist government, has ruled it is taking over the opposition-dominated National Assembly, sparking fears that the crisis-driven country has moved towards full-blown dictatorship.

Arcos Dorados Holdings Inc. issued international bonds for US$265mn maturing in 2027 with a 5.875% coupon. The ten-year notes were sold at a price of 100% with an initial yield of 5.875%. While Bank of America Merrill Lynch, Citigroup, Itau, Unibanco Holdings, JP Morgan, Banco Santander acted as bookrunners.

Andes Energia PL announced that it had secured two new credit facilities with Mercuria worth US$60mn. The first one is a US$20mn debt will be used to finance drilling activities in Chachaheun in Argentina and the second is a US$40mn credit facility to fund drilling activities across their Andes portfolio.

CMPC, Chilean pulp and paper company, raised US$500mn from the sale of 10-year bonds in its cross-border return. The transaction had a 2% spread, and funds will be used to refinance existent debt and expand their sustainable investments. Bank of America Merrill Lynch, JP Morgan, and Santander participated in the deal.

LATAM Airlines will start a roadshow in the US, Europe, and Latin American to attract investors for dollar issuance. Even though the amount has not been disclosed yet, it would be led by Bank of America Merrill Lynch and Credit Suisse as global coordinators, and BNPP, BTG Pactual, Natixis, and Santander will act as joint bookrunners.

Brazil's government will overhaul in 2018 the benchmark interest rate that state development bank BNDES uses for long-term corporate loans, the Planning Ministry in an attempt to reduce costly subsidies. The so-called TJLP lending rate, currently set on a quarterly basis by the National Monetary Council, will be replaced by a new rate based on yields paid by inflation-linked NTN-B bonds.

Brazil’s economic activity fell 0.26% in January from December after seasonal adjustments, the central bank said on Friday, after a decline of 0.32% in the previous month.

Russia, CIS and Europe

Ukraine will appeal a British High Court’s summary judgment for Russia in its pursuit of more than US$3bn owed since the end of 2015 on Ukrainian sovereign bonds. UK court ruled in a pre-trial hearing that it had no "justiciable" or court-ready defence in the case brought by Russia over the debt dating back to 2013.

Russian banks are yet to sign a "standstill agreement" with Croatia's Agrokor as part of debt restructuring talks, but they plan to do so in the near future, Reuters reported. The food producer and retailer, the biggest employer in the Balkans, built up debts of about HRK4bn or six times its equity.

Croatia prepared on Friday to rush through new legislation to protect the economy from big corporate failures, as the country's biggest private company Agrokor tried to secure a debt restructuring deal. The government has drawn up a new law which it hopes will prevent corporate financial problems from destabilizing the wider economy and financial system.

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