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Emerging Market Credit Daily Roundup

More details on Saudi Arabia privatisation plans revealed – Kuwait outpaces GCC issuances 2 to 1 – Turkish lira, bonds rise following Erdogan referendum victory – SA FinMin advisor suggests total U-turn on policy in op-ed – Afreximbank readying dollar bond – Tunisia unlocks further IMF funding – Petrobras divestment to Statoil suspended – Peru’s Orazul to raise new debt via benchmark-size bonds – Indian loan growth at 60-year low – Rostelecom, PhosAgro look to place new bonds

Apr 18, 2017 // 5:15PM

 

Middle East & Turkey

Saudi Arabia confirmed plans to shift ownership of its airports to the sovereign wealth fund by 2018, as part of the ongoing privatization programme that will also see the IPO of the state-owned giant Saudi Aramco. According to Faisal Al-Sugair, chairman of Saudi Civil Aviation Holding Co., quoted by Bloomberg, airports across the country will be turned into companies before being passed on to the PIF. According to the report, authorities are also looking at the option of privatizing the seaports as oil prices remain on the low side.

Kuwait issuers - led by the sovereign - outpaced other GCC borrowers by more than double, according to fresh data from Reuters. Kuwait saw US$11.6bn in issuance through Q1 2017, led by the sovereign - which placed US$8bn in the international markets. This was followed by Qatar and Oman, which saw US$5.1bn and US$5bn through the first quarter this year, respectively. All told, GCC issuers raised US$26.1bn in the first quarter.

Qatar's Central Bank sold QAR5.575bn (approx. US$1.53bn) in domestic bonds this week, it announced. The Central Bank sold QAR150mn in 3-year notes at 2.75%, QAR800mn in 5-year notes at 3.35%, QAR1.17bn in 7-year notes at 4%, and QAR2.925bn in 10-year notes at 4.5%.

The Central Bank of Bahrain’s monthly sukuk issuance was oversubscribed, it announced this week. The CBB secured BHD61.1mn (approx. US$162mn) in demand for BHD43mn in 91-day Sukuk Al-Salam securities.

Bahrain National Gas Expansion Co, a subsidiary of the country's National Oil and Gas Authority, signed a US$515mn syndicated loan that will back part of the expansion of its gas processing facilities, Reuters reported. Carrying an eight-year tenor, both local and regional banks participated in the transaction including Bank of Bahrain and Kuwait, Gulf International Bank, Ahli United Bank, Arab Bank, Bahrain Islamic Bank, National Bank of Bahrain and the Bahraini arm of National Bank of Kuwait.

The AAOIFI's exposure draft of its proposed financial accounting standard No. 29 could bring much needed clarity on whether Sukuk can be structured and issued as liability instruments, and could strengthen the case for further legal standardisation of shariah-compliant instruments, according to a note from S&P Ratings. "Coupled with the AAOIFI's previous proposal on centralised Shari'ah boards, we think this could strengthen the case for standardising the legal and Shari'ah aspects of Sukuk. We also think the proposal could benefit from recognising any independent contractual or promissory arrangements associated with Sukuk issuance as part of a Sukuk's core contracts. In most cases, these contracts create a financial liability for the sponsor to pay back investors, thereby exposing Sukuk holders to risks related to the sponsor's incapacity to honour its obligations," explained Mohamed Damak, Global Head of Islamic Finance, S&P Ratings in a recent note.

Turkish dollar bonds rose across to five-month highs after President Tayyip Erdogan's victory in a referendum on constitutional changes that could allow him to stay in power until 2029. The most-traded 2030, 2034, 2036 and 2045 issues rose up to 0.5 cents according to Reuters data, to hit their highest levels since early November 2016.  On Tuesday, Turkish five-year credit default swaps were trading at 233 bps, according to IHS Markit.

Turkish confectioner Ulker Biskuvi secured a 3-year dual tranche syndicated loan this week, the company announced. The US$375mn equivalent loan was split into US$136mn and €225mn tranches. Some of the proceeds from the loan will go towards refinancing existing debt maturing in 2017.

 

Africa

An adviser to South Africa's new Minister of Finance has advocated for further nationalisation of the country's banks and mines, he explained in an editorial at the weekend. In a piece entitled "Our chance to complete the revolution", published in Africa's Sunday Times, Christopher Malikane, an economics professor at Johannesburg’s University of the Witwatersrand and adviser to the incoming Minister of Finance Malusi Gigaba, proposed among other things the creation of a state bank that would combine the government's financial and quasi-financial institutions, and the expropriation of mines and other productive land. The move could signal a radical departure from existing policy, something likely to irk investors.

South Africa is to report March CPI today, which is expected to rise slightly to 6.4% year on year, up from 6.3% last month. The rand has plunged in international markets in recent weeks after the country's Minister of Finance was unexpectedly sacked.

African Export-Import Bank (Afreximbank) is looking for proposals from a range of international lenders as it looks to raise fresh US dollar denominated debt in the international capital markets, according to a report from Reuters. The move comes off the heels of a US$700mn syndicated loan signed last week with a group of about 14 lenders.

Ghana intends to end its three-year US$918mn loan deal with the International Monetary Fund on schedule in April 2018, the country’s Finance Minister said on Thursday. Ken Ofori-Atta announced to reporters that the conclusion of the IMF programme the country inherited from the previous government “means a lot more hard work” and “some very tough decisions…regarding our deficit” in the 2017 budget.

The IMF has agreed to pay out a US$320mn second tranche of Tunisia's loan programme after a successful round of negotiations on the government's reform priorities, Reuters reported on Tuesday. The portion of the US$2.8bn loan programme was delayed from December because of a lack of progress in reforms to cut public spending and overhaul state finances demanded by Tunisia's multilateral lenders.

 

Americas

Colombian infrastructure developer ISA will look to offer up to COP700bn (approx. US$243mn) in local bonds, according to a report from Reuters. The bond is said to be split between three tranches maturing in 7, 15 and 25 years, and part of a wider COP3.5tn in planned issues.

The BRL firmed against the US dollar in early trading this week as the country's Central Bank stepped up its market intervention activities. The Central Bank sold US$800mn in currency swaps this week to further roll over currency contracts expiring next month.

Brazil is to report mid-April IPCA inflation Thursday, which is expected to rise 4.48% year on year compared with 4.73% in mid-March. The bank recently trimmed 100bp off the selic rate in the hopes of stimulating more economic activity.

A Brazilian court has ordered Petrobras to suspend the sale of its stake in an exploratory block to Norway's Statoil after a union argued the sale didn't follow a bidding process. The sale of the 66% stake in the offshore project was the first major pre-salt asset approved for sale by regulators, and part of the company's efforts to raise up to US$21bn over the next two years to help pay down its debt.

Brazilian President Michel Temer told local press that some of his cabinet ministers may resign after being placed under investigation following a raft of new corruption allegations made by current and former Odebrecht employees. Currently, about a third of the cabinet - eight ministers - are under investigation by the Supreme Court, including a number of key advisers to Temer, and the president himself.

Brazilian issuers sold BRL52.2bn (US$16.7bn) in bonds in the first quarter of this year, a 139% increase on the same period in 2015, according to local capital markets association Anbima. Cross-border issues reached US$9.95bn in the first three months of 2017, while local debt sales reached BRL12.6bn in Q1 this year, down from BRL13.2bn in the same quarter last year.

Peruvian energy generator Orazul could raise $550m in new paper this year, according to reports in local media.

 

Asia

Credit growth in India has reached an all-time low of 5.08% in fiscal year 2017, compared with 10.7% the year before, according to fresh data from the Reserve Bank of India. Despite a strong boost in corporate bond activity, the corporate loan market has hit its lowest point since 1954, according to the RBI.

South Korea's National Pension Service, a major bondholder in ship builder Daewoo Shipbuilding & Marine Engineering Co., has agreed to a debt restructuring plan that will affect about US$1.53bn in bonds. According to a report in Bloomberg, the company needed to repay about KRW200bn, or 45% of bonds maturing in April.

Bank Indonesia meets Thursday and is expected to keep rates unchanged at 4.75%, despite adopting a more hawkish tone at the banks last meeting. CPI rose slightly to 3.6% year on year in March, well within target range.

State-owned export bank Export-Import Bank of Thailand (EXIM Thailand) hit the international markets Monday to price a US$120mn bond. The notes maturing 2022 were priced at par and carry a coupon of 6MLIBOR+0.37%. The deal was sole led by Mizuho Financial Group.

Moody's on Tuesday affirmed Bangladesh's Ba3 rating with a stable outlook.

 

Russia, CIS and Europe

Russian state-run statistics agency Rosstat has been accused of inaccurate reporting after observers noted that forecasts following the agency’s “change in methodology” have been surprisingly optimistic. Rosstat, which was recently shifted under the wing of the Ministry of Economy, surprised economists by recording a GDP contraction of just 0.2% last year, much smaller than expected. It also revised the previous year's contraction to just 2.8% from an initial 3.7%.

Russia’s state-owned shipping giant Sovcomflot is suing Venezuela’s state-run oil producer PDVSA for US$30mn for unpaid shipping fees, after the Venezuelan company failed to compensate its Russian partner for using its tanker to transport US$20mn worth of oil to the Caribbean. The owner of the tanker held the oil in hopes of collecting partial payment on the debt from the company that is based in the Latin American country, which has strong political and economic ties with Moscow.

Russian state-controlled telecom operator Rostelecom is preparing to tap the markets with a RUB10bn 10-year exchange bond next week, with initial guidance for the first coupon set at 8.80–8.95% annually and Gazprombank, Rosbank, Sberbank CIB and VTB Capital acting as organizers.

Russia’s biggest phosphate fertilizer producer PhosAgro is looking to place a 5-year dollar-denominated Eurobond in coming weeks. The roadshow for the bond will take place on 20 April, with investor meeting happening in Moscow, London and the US. BofAML, Citi, Sberbank CIB, SGCIB, UBS, UniCredit and VTB Capital have been appointed as organizers.

Bosnia's autonomous Serb Republic is looking to raise up to US$27.2mn through the sale of 5-year marka-denominated notes on May 3. The notes are being sold to help finance existing maturing debt following a delay in the releases of fresh funding from the IMF.

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January / March 2020

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