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Emerging Market Credit Daily Roundup

IFC to help launch US$2bn global green bond fund – Turkey’s Is Bank placed US$750mn bond – AfDB to allocate US$12bn to African energy projects - Argentinean province Neuquen issued US$366mn 7.5% international bond - ICBC Singapore placed a US$2bn dual-tranche bond - Foreign investors bought up RUB159bn in local currency Russian debt – General Motors joins the list of companies to leave crisis-hit Venezuela

Apr 21, 2017 // 6:19PM

Global

The IFC and fund manager Amundi are launching what the two companies claim to be the largest emerging market green bond fund to date. The US$2bn Green Cornerstone Bond Fund initiative will aim to deepen local-currency green bond markets and encourage more local financial institutions across emerging markets to issue green bonds.

Moody's has reduced its global estimate for green bond issuance in 2017 to US$120bn, down by nearly half from an earlier forecast of US$200bn. The rating agency cited a slowdown in issuances out of China as one of the main reasons behind the drop.

Middle East & Turkey

S&P Global Rating expects a further decline in Gulf Cooperation Council (GCC) banks' asset quality and profitability indicators in 2017-2018. The end of the commodities super-cycle has sparked a fall in the economic growth and prospects of the GCC region, implying both lower growth opportunities and deteriorating liquidity for its conventional and Islamic banking systems.

Shareholders of Dubai-based Gulf Navigation have approved a forthcoming US dollar denominated sukuk this week. The company is targeting a US$250mn 5-year issuance, carrying a profit rate of "below 10%".

Turkey's Is Bank hit the international markets this week to place a US$750mn bond. The notes maturing 2024 were priced at par and carry a coupon of 6.125%. Citigroup, Emirates NBD, Erste Group, HSBC, Mizuho Financial Group, and Wells Fargo managed the trade.

Africa

Kenya raised US$318mn from two 10-year bonds which they will use to cover the fiscal year deficit.  The issuance was almost twice oversubscribed and carried a weighted average rate for successful bids of 11.3% and 11.9% respectively.

The African Development Bank (AfDB) is putting US$12bn into African energy projects over the next five years in a bid to stimulate further investment into the sector, the bank's president said this week. Akinwumi A. Adesina, speaking at the IMF Spring Meetings this week, said the bank is hoping to attract up to US$50bn in fresh investment into the continent's energy sector, which currently suffers a significant funding gap.

Nigeria's Minister of Solid Minerals Development, Kayode Fayemi, said the country is looking to secure an additional US$150mn from the World Bank to help finance new mining development in the country. The Minister met with World Bank officials alongside the IMF Spring Meetings in Washington this week.

The fiscal targets in Kenya's recent budget statement suggest a shift away from strongly expansionary fiscal policy, Fitch Ratings said. "It targets a reduction in the fiscal deficit to 6.0% of GDP, from a projected 8.3% in FY17. The FY17 deficit estimate is higher than Fitch's 7.1% forecast due to an increase in capital expenditures, higher-than-expected current expenditures ahead of the general election scheduled for August 2017 and in response to the drought, and lower-than-expected revenue growth...The FY18 budget appears to signal that a cycle of expansionary fiscal policy is coming to an end," the agency said.

Nigeria's interbank lending rate climbed 20pp after the central bank's sale of dollar forwards to offset a backlog of forex obligations drained cash from the money market. The overnight lending rate stood at 50% against 29.33% the previous day because commercial lenders scrambled for cash on Friday to pay for dollar purchase at a central bank foreign exchange intervention auction targeting certain sectors.

Tunisia will restrict some imported goods to tackle its widening trade deficit and protect foreign reserves, as the dinar continues to slide against the euro. "The fall of the dinar reflects this enormous trade deficit but there is no need to panic. We will take some decisions. We will limit some random imports. We have a lot of unnecessary imports," Prime Minister Youssef Chahed told reporters on Friday. Tunisia's trade deficit expanded by 57% to reach US$1.68bn in the first quarter of this year because of a jump in imports.

Mauritius' trade deficit widened 15.6% to MUR5.64bn (US$160.68mn) in February from the same period a year earlier due to a fall in exports of manufactured goods, the statistics office said on Friday. Export revenue fell 9.8% to MUR6.29bn, with manufactured goods dropping to MUR1.83bn from MUR2.62bn in February last year. Imports rose 0.7% to MUR11.94bn, Statistics Mauritius said in a statement.

Americas

The Argentinean province, Neuquen issued international bonds for US$366mn maturing in 2025 with a 7.5% coupon. Bonds were sold at a price of 100% with an initial yield of 7.5%. Citigroup and Banco Santander acted as bookruners.

General Motors is the latest of a number of international companies to exit Venezuela in the wake of escalating violence after its plants were seized by government officials. Bridgestone, Clorox, Ford Motor, General Mills, Kimberly Clark and Procter & Gamble are among the large international firms that have either left or suspended operations in Venezuela over the past year as the economic crisis deepened.

Peru has secured US$3bn in a contingent credit line from the World Bank to help finance road reconstruction following the devastation to infrastructure caused by El Niño. The Peruvian government previously said that it would not need to secure external financing to fund reconstruction efforts in the country.

Nicaragua has secured a US$136mn loan from the European Investment Bank (EIB) to help finance an expansion and upgrade of the Pista Juan Pablo II route, the bank said this week. The loan will complement the US$107.5mn in funding provided by the Central American Bank for Economic Integration (CABEI) in February to help rehabilitate and upgrade the 10km stretch of road.

The Argentine province of Neuquen placed a US$366mn bond this week. The notes maturing 2025 were priced at par to yield 7.5%. Citigroup and Santander managed the sale.

Ratings agency S&P has downgraded El Salvador’s sovereign credit rating to “selective default” (SD) after the government missed payments related to its pension debts. The government missed US$28.8mn worth of payments due between April 7 and April 10 after Congress failed to approve the budget to cover the payments. If a solution is not found, the total amount of owed payments could rise to US$55.2mn by the end of this month.

Asia

China's property loans increased by RMB1.7tn in the first quarter of 2017, accounting for 40.4% of all new loans made in the quarter, the People's bank of China (PBOC) said.  Outstanding individual mortgages rose 35.7% from 2015.

Malaysian public housing authority, Lembaga Pembiayaan Perumahan Sektor Awam (LPPSA), successfully placed a MYR3.25bn sukuk to help finance public housing loans. The notes were issued in multiple tranches ranging from 5 to 30-years, and are part of the LPPSA's MYR25bn medium term note programme. Affin Hwang Investment Bank, AmInvestment Bank, Bank Islam Malaysia, CIMB Investment Bank, Maybank Investment Bank, OCBC Bank (M) and RHB Investment Bank arranged the sukuk.

India's Bajaj Finance raised Rs500 crore (approx. US$77mn) in non-convertible debentures. The bonds were sold in a private placement at a yield of 7.75%.

Investment holding company Want Want China Holdings has issued US$500mn in fresh bonds this week. The notes maturing 2022 were priced at 98.878% to yield 3.14%. Credit Suisse and Nomura arranged the sale.

China Huarong International Holdings issued US$3bn in notes across five maturities and multiple currencies this week. The company sold US$500mn in notes maturing 2020 priced at par to yield 3MLIBOR+165bp, SGD600mn (approx. US$429mn) in notes maturing 2021 priced at par to yield 3.2%, US$1bn in notes maturing 2022 priced at par to yield 3MLIBOR+185bp, US$570mn in notes maturing 2022 priced at 99.892% to yield 3.774%, and US$700mn in notes maturing 2027 priced at 99.709% to yield 4.84%.  ANZ, Standard Chartered Bank, Nomura International, Morgan Stanley, ICBC, China Huarong Asset Management, HSBC, Goldman Sachs, Deutsche Bank, DBS Bank, Bank of China, Bank of Communications, CCB International, China Minsheng Banking, CMB International Capital Corporation, Commonwealth Bank, and Credit Suisse managed the trade.

ICBC Singapore placed a US$2bn dual-tranche bond in international markets this week. The bank placed a US$550mn tranche maturing 2020 priced at par and yielding 3MLIBOR+77bp and a US$1.45bn tranche maturing 2022 priced at par to yield 3MLIBOR+95bp. Agricultural Bank of China (Hong Kong), Bank of Communications, Bank of America Merrill Lynch, BNP Paribas, CCB International, DBS Bank, HSBC, ICBC, Mizuho Financial Group, OCBC, and Standard Chartered Bank managed the sale.

Chinese property developer Times Property placed a US$225mn bond maturing 2022. The notes were priced at par to yield 5.75%. Citigroup, Deutsche Bank, Haitong International securities, JP Morgan, SPDB International Holdings Limited, and UBS managed the sale.

According to the IMF, China’s economy may grow faster than expected this year, after its first quarter performance beat the forecast.  Data this month showed China's economy grew at a faster-than-expected rate of 6.9% in the first three months of this year after record credit growth, a gravity-defying property boom and higher government infrastructure spending juiced activity.

Korea Railroad Corporation issued international bonds for AUD 50mn maturing in 2032 with a 4.11% coupon. Bonds were sold at a price of 100% with an initial yield of 4.11% and Nomura International was the sole bookrunner for the transaction.

Russia, CIS and Europe

Foreign investors bought up RUB159bn (approx. US$2.8bn) in local currency Russian debt in March, the highest volume on record to date according to Bloomberg and the Bank of Russia. Analysts suspect the move was driven in part by the Fed's dovish outlook.

Russia’s Transneft is to begin accepting bids for RUB30bn 3.5-year exchange bond on April 25, with first coupon guidance set at 8.9–9.0% annually, and VTB Capital acting as the organizer.

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