Middle East & Turkey
Saudi Arabia placed a whopping US$9bn sukuk in its debut on the international Islamic capital markets this week. The sale was split between a US$4.5bn 2022 tranche priced at par to yield 2.9149%, and a US$4.5bn 2027 tranche priced at par to yield 3.628%. BNP Paribas, Citigroup, Deutsche Bank, HSBC, JP Morgan, and National Commercial Bank led the sale.
GCC sovereigns raised US$69.1bn through bond issuances and syndicated loans, outpacing the previous 2014 record of US$35.6bn, according to a report published by Securities & Investment Company (SICO). "While the gradual improvement in oil prices, and the Opec agreement in November to curb crude output delivered a much-needed boost to investor sentiment, ongoing fiscal consolidation in the GCC is another – arguably more important – factor that should continue to stoke investor interest in regional fixed income during 2017. Rising interest rates, a steepening yield curve, record debt issuances, and continued market volatility, constitute the consensus call for this year," the report's authors said in a statement.
GCC entities are likely to see a growing number of credit rating downgrades following Saudi Arabia's sovereign IDR rating downgrade last month, according to a note from Fisch Asset Management. “From a supply perspective, countries continue to finance their deficits frontloaded in the bond market to fight the liquidity drain. This has led to two key outcomes: MENA issuances have gained in relevance versus other emerging market regions (17% of issuance) and sovereigns are issuing heavily, creating a crowding-out scenario. We are therefore likely to see risk premiums going up after a significant rally, as GCC credit continues to be downgraded. We continue to selectively invest in the region, but have reduced our overweight to a neutral position in the past few months," Philipp Good, CEO at Fisch Asset Management said in a statement.
Abu Dhabi Financial Group (ADFG) is planning to sell an AED3bn (approx. US$816mn) real estate investment trust (REIT) before the end of this year, the company announced this week, a step forward for the asset class - which is relatively nascent in the region. The REIT, to be known as 'Eihad Reit', will include about 10 properties.
Dubai-based property developer Damac priced its hotly anticipated bond this week, placing US$500mn in notes maturing 2022 at 6.25%, on the tight end of guidance. Bank of America Merrill Lynch, Emirates NBD, HSBC, and VTB Capital managed the sale.
Qatar private bank Commercial Bank has completed a pilot project, using blockchain technology for international fund transfers in partnership with banks in Turkey, Oman, the UAE, Egypt and India. The next phase of the testing will specifically focus on using blockchain in trade finance transactions, the bank said. The pilot is, according to the bank, the first in Qatar to use ledger technology for fund transfers.
One of Turkey’s leading banks, Ziraat, has successfully completed its US$278mn and EUR706.5mn dual-currency term loan facility on 3 April 2017. The transaction comprises of two 367-day facilities, denominated in US dollars and Euros, carrying an interest margin of 1.15% p.a. and 1.05% p.a. respectively.
Afreximbank is looking to close a dual-tranche US$700mn loan with a syndicate of lenders, the latest in a spate of transactions including a ZPY4bn Samurai bond last month and a triple-tranche US$872mn syndicated deal in December 2016. ADCB, Arab Banking Group, Barlcays, Commerzbank, Emirates NBD, HSBC, MUFG, SMBC, NBAD, Standard Chartered Bank, Standard Bank and RMB are lead arrangers on the most recent deal.
Nigeria raised less money than it originally planned through a domestic bond auction after investors demanded higher yields to buy the debt, the Debt Management Office (DMO) said. The DMO announced it had raised only NGN105.32bn (US$335mn) from the bond sale, NGN29.7bn less than it was expected. Traders said investors demanded yields of up to 17.55% on the notes but the debt office offered the bonds at yields below 17%.
Nigerian interbank lending rates rose sharply by around 100 points, as commercial lenders struggled to raise cash to pay for bond purchases and cover their positions, Reuters said. Overnight lending rates rose to around 300% at the end of Wednesday, as naira liquidity dried up in the banking system and some banks were forced to borrow from the central bank.
Nigeria's lower house of parliament has set up a committee to investigate the circumstances surrounding the award of oil prospecting licence 245, the committee chairman said on Wednesday. Courts in Nigeria and Italy are investigating the purchase of the offshore block which was initially awarded in 1998 to Malabu Oil and Gas, in a disputed deal, before Royal Dutch Shell and Eni were awarded the rights in 2011.
Nigeria is currently in talks with the World Bank and the African Development Banks (AfDB) over unlocking the remainder of a US$2bn and US$1bn loan, respectively, as the country looks to shore up the funds to finance this year's budget. The AfDB has already disbursed US$600mn, but the sovereign is looking to upsize the remaining US$400mn tranche to about US$1bn, Minister of State for Budget and National Planning Zainab Ahmed said this week. The proposed budget will see about US$23bn spent for FY 2017/18.
Nigeria plans to delay the issuance of its inaugural green bond until the 2017 budget has been passed, the country's Environment Minister said this week. Originally targeted for launch in February, the country's debut green bond has been highly anticipated by many - ever more since the government's success on the international capital markets - yet the launch has been plagued by delays.
Fitch Ratings has downgraded South Africa's top five lenders this week, which include Absa Bank Limited, FirstRand Bank Limited (FRB), Investec Bank Limited (IBL), Nedbank Limited (Nedbank) and Standard Bank of South Africa (SBSA). The rating agency, which took similar actions on four of the holding companies which own the banks, said increasing sovereign risk was a key driver of the rating action.
Teachers in Argentina were back at work this week after striking for nearly two thirds of the school days since the most recent term started. Teachers, who filled the streets to protest by the thousands this month, were demanding wage hikes of up to 30% to compensate for the huge rise in consumer prices; the government stuck to its offer of 20%, arguing that it had little fiscal headroom to go much higher.
Peru's Economy and Finance Minister Alfredo Thorne said the government will be able to fund reconstruction efforts in parts of the country stricken by El Niño-induced floods that have plagued the country, without having to increase its borrowing. Thorne said his department estimates the country can tap into US$1.84bn stashed away by other state bodies.
Venezuela's state oil company PDVSA has made US$2.6bn in bond payments this week, the company confirmed. President Nicolas Maduro’s socialist government has met commitments to investors for years by slashing imports of basic goods such as food and medicine, spurring the country's chronic product shortages. Vice President Tareck El Aissami said the payment includes interest on Venezuela's sovereign debt.
President Michelle Bachelet announced that she was she was sending a bill to Congress that would increase the size of public pensions in the face of growing opposition to Chile's current private system. The bill would include an increase in the amount of savings held collectively, a new 5% payroll tax, and a corresponding boost in retirement savings. Current pensioners would see savings rise by around 20%, while workers currently paying into the system would see increases of up to 50%.
Chinese lender United Overseas Bank launched its latest 0% coupon bond in the international markets this week. The bank priced a US$50mn bond due 2037 priced at par. United Overseas Bank led the sale.
Chinese investment bank CITIC Securities Co. placed a US$300mn bon maturing 2020 in the international capital markets this week. The notes were priced at 99.826% to yield 2.811%. Bank of China, CITIC Securities International, CCB International, Citigroup, HSBC, and Standard Chartered Bank managed the sale.
Bank of China Macau priced a US$750mn bond maturing 2022. The notes carry a coupon of 2.875% and priced at 99.585% to yield 2.97%. Agricultural Bank of China, Bank of China, Bank of Communications, CCB International, Citigroup, Commonwealth Bank, Deutsche Bank, HSBC, Shanghai Pudong Development Bank, and Standard Chartered Bank led the sale.
Chinese insurer Ccb Life Insurance, which is owned by China Construction Bank, placed a US$500mn 60-year bond in the international capital markets this week. The notes maturing 2077 carry a 4.5% coupon and priced at par. CCB International, CICC, HSBC, and Morgan Stanley managed the sale.
State-owned Oil India raised US$500mn in fixed rate notes this week. The notes maturing 2027, which were raised via the company's Singapore-based subsidiary, carry a coupon of 4% and were priced at 99.584%. Proceeds from the issuance will help partially repay a bridge loan originally used to finance the acquisition of large stakes in several Russian companies. Barclays, Citigroup, DBS Bank, Mitsubishi UFJ Financial Group, Mizuho Financial Group, and Standard Chartered Bank managed the sale.
Corporate bond issuance in India grew more than 20% in fiscal year 2016/17 as lower costs in the capital markets coupled with the Basel III rule phase-in helped draw borrowers off bank balance sheets, data published by the country's capital markets regulator suggests. Corporates borrowed about Rs7,02,567 crore from the corporate bond market between March 2016 and 2017, compared with Rs5,84,592 crore during the same period the year before.
Russia, CIS and Europe
Russia's government is to inject US$265mn of state budget money into a state-owned bank in Crimea. The lender does not have enough capital to finance infrastructure projects in the region, which is under international sanctions following Russia’s annexation of it from Ukraine.
Russian metal giant Metalloinvest is preparing a buyback deal for its US1bn April 2020 Eurobond. The company will then host a roadshow for a new 7-year issuance, with VTB, Bank of America Merrill Lynch, CS, ING, Sberbank CIB, Societe Generale CIB acting as arrangers.