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Emerging Market Credit Daily Roundup

Al Baraka picks banks for sukuk – Aluminium Bahrain secures fresh funding for Line 6 project – Daewoo E&C inks loan deal with QIB – Kenya legislation to help facilitate sukuk issuance – Bank of China places first RMB bond out of Africa – Sanral delays bond over demand concerns – Dutch court orders Oi subsidiaries to enter bankruptcy proceedings – Unidas to hit the market with fresh debenture – IMF signals new concerns over China debt – Kalashnikov launches fresh exchange offer

Apr 20, 2017 // 5:22PM

 

Middle East & Turkey

Fitch Ratings has assigned a final rating of 'A+' to Saudi Arabia's US dollar-denominated sovereign sukuk, a hybrid Mudharaba sukuk issued under its larger debt issuance programme. The rating is in line with expectations, taking into account Saudi Arabia's long-term issuer default rating of 'A+' with a stable outlook.

Bahrain’s Al Baraka Banking Group picked a group of seven lenders to help arrange the sale of a US dollar denominated sukuk this month, according to a report in Bloomberg. Credit Agricole, Emirates NBD, Dubai Islamic Bank, Kuwait Finance House, Noor Bank, Standard Chartered, and QInvest have been mandated to help arrange the sale of the sukuk.

Aluminium Bahrain has secured a US$700mn funding package from a range of international lenders and backed by German and Swiss ECAs to finance the Line 6 project. The loan was split between a US$310mn tranche and €315mn tranche, along with a €50mn support facility from Euler Hermes. The loans carry a 15-year tenor with a 3-year grace period.

Abu Dhabi-based developer Tamouh Investments has secured a AED310mn (approx. US$84.4mn) 10-year facility from Abu Dhabi Islamic Bank (ADIB) to finance the final phase of construction of the Paragon Bay Mall in Marina Square, Reem Island. The mall is scheduled to open in early 2018, the company said in prepared remarks.

South Korea's Daewoo E&C has secured a US$125mn loan with Qatar Islamic Bank (QIB) in a bid to further diversify its funding sources as it looks to expand projects in Qatar. The E&C company has been tapped to work on a number of gas projects in the region.

The IMF has lowered its economic forecasts this year for Egypt and Saudi Arabia this week, two of the Arab world's largest economies. Growth forecasts for Egypt were revised down from 4% to 3.5% for 2017, while Saudi Arabia is now expected to grow 1.3% - down from 2.3% initially forecast late last year.

 

Africa

Kenya's Treasury has proposed a number of changes to financial regulation through a new finance bill that would make it easier for the government to issue sukuk. The changes to the Public Finance Management Act through the Finance Bill 2017 will make it easier for the treasury to earmark proceeds from a bond sale for a specific purpose. The government hopes to raise US$2.5bn from external sources this year, which could include the sale of sukuk. The news comes amidst fresh warnings from the World Bank that Kenya's public debt could grow from 51.4% of GDP at the end of 2016 to 60% of GDP if the government continues borrowing at its current pace.

Bank of China's Johannesburg branch completed the first RMB-denominated bond issued out of Africa this week. The RMB1.5bn note maturing in 2020 was oversubscribed by 2.13x and carries a yield of 4.88%. Proceeds from the issuance will be used to finance One Belt Road Initiative projects.

South African National Roads Agency (Sanral) has delayed a planned bond issuance due to concerns that it would struggle to attract sufficient investment demand after the country was hit with a raft of downgrades. The company made the announcement after Transnet, a state-owned logistics company, yielded just ZAR20mn from a planned ZAR200mn issuance earlier this month.

Ecobank was forced to write off NGN221.7bn in non-performing loans for 2016, the company said this week, which was more than double the NGN105bn the bank wrote down in 2015. Analysts suggest the news is a sign that Nigeria's banks are still heavily exposed to severe economic headwinds weighing on the country.

 

Americas

The World Bank is ready to step in and help Venezuela but the country has had no engagement with the organisation since 2008, when it paid off past loans under President Hugo Chavez. In an interview with Reuters, Jorge Familiar, World Bank Vice President for Latin America and the Caribbean said the Bank would be ready to develop an engagement programme, but that it would need to be invited by the Maduro administration.

Phoenix Tower International, which has a range of telecoms assets throughout Central and South America, inked a US$120bn syndicated loan led by Scotiabank.  Banco General, ING Capital, Popular Bank, Towerbank International, and Metrobank also participated with the transaction.

Lower borrowing rates in Brazil are likely to help companies refinance existing debt, according to a new report from Moody's. Following a selic rate cut of 100bp earlier this month, the rating agency said companies should take advantage by refinancing existing credit, but that banks will likely trim loan disbursements through 2018 until more deleveraging has taken place.

A Dutch court on Wednesday ordered two subsidiaries of Brazilian telco Oi SA to begin bankruptcy proceedings, according to Reuters. The Dutch subsidiaries, which hold most of the company's outstanding debt, will give creditors added leverage in the debt restructuring proceedings taking place in Brazil

Mexican bread maker Grupo Bimbo will look for expansion opportunities in China and the Middle East, it's chief executive said this week. The company will look for "consolidation that will allow for expansion," or acquisition opportunities in other words.

Months after scrapping an IPO due to sluggish demand, Brazilian car rental company Unidas SA is in the market for a BRL300mn (approx. US$96mn) debenture. The local debt sale is being coordinated by Banco Santander.

Argentina’s Finance Minister, Luis Caputo announced that the sovereign could raise up to US$2.5bn in Swiss francs, euros or yen through the year. The southern country also plans to sell $6.5bn in the local capital markets in either pesos or dollars, Caputo told journalist in a meeting in New York. The country covered roughly 70% of its fundraising needs in Q1 this year, which has limited its exposure to global risks, such as the presidential election in France or higher interest rates in the US, according to the Minister.

The Mexican peso weakened to its lowest level in nearly two weeks as oil prices slipped and after remarks by US President Donald Trump fuelled expectations of strong protectionist measures against Mexico. The peso weakened 1.3% after Trump reiterated his threat to eliminate the North American Free Trade Agreement(NAFTA) with Canada and Mexico if it cannot be changed.

Mexico’s competition authority announced an investigation over possible anticompetitive practices related to the sale of government-issued debt securities. The Comisión Federal de Competencia Económica (COFECE)said it’s investigating the possibility of monopolistic practices by intermediaries in the market for debt securities issued by the Mexican government. Authorities didn’t disclose the names of any of the entities being looked at, but the bonds can be purchased through brokerages and other financial institutions.

 

Asia

The IMF has once again raised concerns about the sustainability of a significant accumulation in credit in China, and has called for further strengthening of the domestic financial supervisory environment. Speaking during the release of the Fund's latest Financial Stability Report, Tobias Adrian, Financial Counsellor and Director, IMF Monetary and Capital Markets Department said the Chinese authorities have taken steps to address rapid credit accumulation and shadow banking. "They show some success in reining in credit growth, but, in our view, more needs to be done," he said.

China is said to be putting together a consortium that will seek to become one of the dominant investors in Saudi Aramco once the company goes public later this year, according to a report from Reuters. The consortium is said to include Chinese state-owned oil giants and the country's sovereign wealth fund, China Investment Corporation (CIC). Saudi Aramco is expecting the floatation to yield up to US$100bn.

Singapore-based Halcyon Agri hit the international markets this week to place a US$150mn perpetual bond. Sale of the notes paying 4.5% until April 2019 was arranged by Credit Suisse and DBS Bank.

Mongolia is expected to receive the first tranche of a US$5.5bn funding programme inked with the IMF, the fund's country representative said this week. The programme will see the IMF pay about US$425mn over 10 years, with about US$3bn coming from other donors including the World Bank, Asian Development Bank, Japan and Korea. The country has been badly hit by the commodities downturn.

 

Russia, CIS and Europe

Russia's Central Bank said on Tuesday it will lend RUB66.7bn (US$1.19bn) to help keep troubled bank Peresvet, a lender run by the Russian Orthodox Church, afloat. Peresvet, one of Russia's top-50 lenders, will receive a further RUB69.7bn from more than 70 creditors who agreed to convert their loans into 15-year subordinated bonds in accordance with Basel III bail-in mechanisms. This, however, may not be enough to cover a hole in Peresvet's balance sheet, which currently stands at 103.6 billion roubles, up from the previous RUB30bn and, later, RUB69bn estimates.

Russian arms producer Kalashnikov will collect bids for a RUB3bn 5-year exchange bond on April 25, with guidance for the first coupon set at 11–11.5% annually, corresponding to an 11.3–11.83% annual yield to a 3-year buyback offer. The technical placement is scheduled for April 27, with Bank Rossiya acting as organizer.

The EBRD issued a RUB3bn international bond maturing in 2018 with a 8% coupon, as well as a INR4.52bn bond maturing in 2020 with a 6% coupon with JP Morgan appointed as bookrunner for both deals.

The Russian Central Bank announced its support for the idea of state OFZ bond issues for individuals, Chairwoman Elvira Nabiullina said at a meeting at the Finance Ministry on Thursday. “We also support the project we have been long discussing: the issuance of OFZs for people. This is a factor which will increase efficiency of the monetary transmission mechanism, and for the people, this is an absolutely secure, profitable alternative to deposits,” Nabiullina said, quoted by Reuters. She said the central bank does not expect the mechanism to hurt Russian banks. Russia’s debut OFZ bonds for households will have a three-year maturity and the first issue will amount to RUB20bn at a yield of 8.5% annual, Finance Ministry said in a statement last week.

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