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Emerging Market Credit Daily Roundup: 10 July, 2017

Saudi Arabia to issue local sukuk – Gulf Navigation Holding will issue a US$250mn sukuk – Etisalat to leave Nigeria – Venezuela offered ONGC Videsh (OVL) an increased stake in an oil field – Greenko will raise US$1bn through a green bond– Lietuvos Energija AB issued EUR300mn international bond - Rosseti has set the final guidance for the first coupon on its 5-year bond – Russian bank Yugra goes into administration

Jul 10, 2017 // 5:27PM

Middle East & Turkey

Saudi Arabia is set to issue a local currency sukuk this month, Saudi finance minister Mohammed al-Jadaan told Al Arabiya News. The kingdom is expected to tap both the local and international bond markets this year, depending on the level of demand and the pricing it can obtain, al-Jadaan said in May.

Gulf Navigation Holding, a Dubai’s listed shipping firm, plans to issue a US$250mn sukuk in late August or early September, Reuters reported. First Abu Dhabi Bank will lead the transaction and the proceeds will be used to support the company’s expansion plans.

According to Qatar’s Central Bank governor Sheikh Abdullah Bin Saoud al Thani, the Gulf nation has US$340bn in reserves that could help it weather the isolation by its powerful Arab neighbours. “This is the credibility of our system, we have enough cash to preserve any... kind of shock," he told the CNBC. Al-Thani said the central bank has US$40bn in reserves plus gold, while the Qatar Investment Authority sovereign wealth fund has US$300bn in reserves that it could liquidate.

Egypt expects the monthly inflation rate to stabilize within four months at between 1-1.25%, Egyptian finance minister Amr El-Garhy said on Monday, according to Reuters. The monthly inflation rate in Egyptian cities fell to 0.8% in June from 1.7% in May, the official CAPMAS statistics agency said on Monday. However, Egypt's annual urban consumer price inflation rose in June to 29.8% from 29.7% in May. Cash inflows into the North African country’s banking system totalled more than US$57bn since Egypt floated its currency in November, Egypt's Central Bank governor told al Akhbar newspaper on Sunday.

French oil giant Total could take the lead role in bringing Iran back into the global markets after agreeing to cooperate with Qatar over developing the largest gas field in the world. Total boss Patrick Pouyanne signed a deal this month to develop the South Pars field, as Iran's part of the shared reserves are known, getting ahead of Exxon and Shell to become the first oil major to return to the country since the partial lifting of sanctions.

 

Africa

Telecoms group Etisalat ended a management agreement with its Nigerian arm and given the business time to phase out the Etisalat brand in Nigeria, the chief executive of Etisalat International told Reuters. Nigerian regulators intervened last week to save Etisalat Nigeria from collapse after talks with its lenders to renegotiate a US$1.2bn loan were unsuccessful.

South Africa's anti-graft watchdog will not oppose a court challenge against her binding proposal calling for a change to the mandate of the Central Bank, Reuters reported. This comes after Busisiwe Mkhwebane recommended last month that the South African Reserve Bank's (SARB) mandate of maintaining price and currency stability be changed to focus on economic growth. That prompted court challenges from the Central Bank, the finance ministry and parliament.

Zimbabwe's budget deficit will grow by nearly US$120mn this year due to a maize subsidy, in a scheme critics of President Robert Mugabe say will be open to abuse and saddle a troubled economy with more debt. Grain Millers Association of Zimbabwe, a grouping of the 100 biggest private millers, has agreed to buy 800,000 tonnes of maize from the state for US$194mn this season, or $242.50 a tonne, said its chairman, Tafadzwa Musarara. At this price, the government would lose $147.50 for every tonne it buys from farmers and sells to these private millers, totalling US$118mn, according to Reuters estimates. Mugabe argues the subsidy will make the country, where nearly 70% of population is rural-based and survives on agriculture, more self-sufficient and help struggling farmers.

 

Americas

Venezuela has offered Indian oil company ONGC Videsh (OVL) an increased stake in an oil field, Reuters reported, as the country seeks to bolster its bruised energy industry and strengthen ties with New Delhi. State-owned PDVSA has proposed selling a 9% stake in the San Cristobal field to OVL, a subsidiary of India’s state-owned top explorer Oil and Natural Gas Corp.  OVL already holds a 40% stake in the field, which produces around 22,000-23,000 barrels per day.

FHipo, a Mexican investment trust issued a US$185mn in asset backed local securities, with Banorte and Actinver managing the transaction. 

 

Asia

Greenko, India’s clean energy company, is set to raise US$1bn through a dollar-denominated 7-year green bond. The proceeds of the issuance will be used to refinance the company's first dollar bond that raised US$500mn in 2014. Additionally, it will also help the company to refinance the debt that it inherited along with the acquisition of the 350 MW India portfolio of the bankrupt Sun Edison. Barclays, JP Morgan, Morgan Stanley, Deutsche Bank and Investec have been mandated for the fund raising. 

The IFC has invested INR6.6bn into L&T Infrastructure Finance Company Ltd.  As it bought an important in the first market-approved Green Bonds issue in India. The Green Bonds were introduced into India by the country’s Securities and Exchange Board of India (SEBI) on May 30, and allow investors to have their bonds qualified as Green when proceeds are used in the development of projects that support India’s renewable energy infrastructure.

 

Russia, CIS & Europe

State-owned Lietuvos Energija AB issued international bonds for EUR300mn maturing in 2027 with a 2% coupon.  Notes were sold at a price of 98.284% with an initial yield of 2.19%. BNP Paribas and SEB managed the transaction.

Russian power grid operator Rosseti has set the final guidance for the first coupon on its RUB5bn 5-year bond at 8.15% annually, according to PRIME news agency. The technical placement of the bond is scheduled for July 13, with Gazprombank and Alfa-Bank acting as organizers.

EBRD has issued a RUB3bn 6.75% international bond maturing in 2018, with Citigroup selected as bookrunner.

Russia's Sberbank said on Monday it has acquired 18.53% of the shares of Slovenian retailer Mercator at a public auction at the starting price of EUR40.6mn (US$46.2mn). Sberbank previously seized the shares from the Netherlands-based financial holding company Agrokor Investments B.V., which had offered them as collateral for a loan extended by the bank to Croatia's ailing food-to-retail concern Agrokor, according to SeeNews, which quotes sources in Sberbank. Mercator is majority owned by Agrokor.

Russia's Central Bank said on Monday it had introduced temporary administration in mid-sized Bank Yugra for six months and imposed a three-month moratorium on creditor claims to the bank. Yugra's financial position is not stable and presents risks to its creditors and depositors, the CBR said in a statement. According to a CBR representative, the regulator has noticed signs of possible illicit withdrawals of assets and forged accounts at Yugra bank in recent months. Of the more than RUB180bn (US$2.98bn) in deposits at Yugra, some RUB170bn are insured by the state, said Vasily Pozdyshev, deputy Central Bank governor. Yugra is in the Top-30 banks in Russia by size and in the Top-20 by volume of private deposits. 

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