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Emerging Market Credit Daily Roundup: 14 June 2017

Dana Gas proposes to swap its US$700mn sukuk it now deems “unlawful – Egypt’s Central Bank allows international currency transfers – Moody’s downgrades South Africa’s Eskom – World Bank to loan US$500mn to Tunisia – Exim Bank of China mulls US$4bn euro/dollar bonds – Singapore’s Marble II Pte issues US$500mn 5-year bond – US prepares to pass additional sanctions against Russia – Kazakhstan prepares debut blockchain-based mobile bond

Jun 14, 2017 // 4:11PM

Middle East & Turkey

UAE-based Dana Gas has proposed swapping US$700mn of outstanding sukuk into a new sharia-compliant bond because it has discovered the sukuk was 'unlawful', a move that largely surprised investors. The company's bonds were trading at US$0.87 on the dollar following the news. The company said it was seeking agreement among creditors, but has already started proceedings in UAE courts to seek a declaration of the sukuk's unlawfulness.

The Turkish Treasury sold a net TRY1.42bn (approx. US$405mn) in a tap of its benchmark 2-year bond Tuesday. The notes were tapped at an average yield of 11.11%. The Treasury also issued a new 7-year floating rate bond denominated in lira.

Egypt's Central Bank announced it was removing limits on international currency transfers. "It was decided to permit banks to execute their clients' orders to make transfers abroad without maximum limits," the bank said in a statement on Wednesday.

 

Africa

South Africa's Land Bank, an agriculture specialist lender, has secured a US$300mn 10-year loan from Standard Chartered bank. The facility was backed by a Multilateral Investment Guarantee Agency (Miga), the political risk insurance and credit enhancement arm of the World Bank Group.

South African bond and equity markets attracted US$3.5bn in May, according to fresh fund flow data from the IIF. Impressively, the ZAR has stayed below the ZAR13 per US dollar threshold, and is up 5.7% since the start of the year, despite a raft of downgrades and escalating political volatility.

Ratings agency Moody's Investors Service downgraded South Africa's state-owned utility Eskom on Tuesday following the lowering of the country's credit rating last week and said the outlook for the power company was negative. Moody's downgraded the long-term corporate family rating of Eskom and its zero coupon euro bonds to Ba2 from Ba1, leaving it two notches below investment grade. Eskom's probability of default rating was also downgraded to Ba2-PD from Ba1-PD.

The World Bank has approved a US$500mn loan for Tunisia, government officials confirmed this week. The news follows the release of a delayed US$320mn IMF tranche promised in exchange for the government's commitment to expedite economic reforms.

Nigeria's Minister of Transportation, Rotimi Amaechi, has submitted a request to fast track approval of up to US$6.1bn in loans from China. Proceeds from the loans will be used to help develop the country's railway modernisation programme.

Kenya's Treasury is looking to raise the ceiling on the amount of government bonds retail investors can purchase on the M-Akiba platform, a mobile app used to sell government securities. The platform, launched in March this year, lets investors buy between KES3,000 and KES140,000 in a single day's trading.

Ghana's annual consumer price inflation fell to 12.6% in May from 13% the previous month, the statistics office said on Wednesday quoted by Reuters. The government is aiming to narrow inflation to 11.2% by the end of the year as one part of a drive to restore macroeconomic stability under a three-year assistance program with the IMF.

Zimbabwe's government intends to issue a three-year US$50mn bond to finance irrigation infrastructure in the country, as part of the efforts to improve its long-term food security, according Reuters.

Nigeria plans to sell NGN133.24bn (US$424mn) worth of treasury bills at an auction next week, the Central Bank said.  The bank announced it plans to offer NGN28.12bn worth of three-month debt, NGN55.12bn n in six-month bill and NGN50bn naira in one-year note.

Americas

Chile tapped the international markets with a US$1.2bn bond, maturing in 2047 which carried a 3.86% coupon. Notes were sold at a price of 99.841% with an initial yield of 3.869%. Citigroup, Goldman Sachs, HSBC and JP Morgan acted as joint bookrunners.

Brazil's President Michel Temer has expressed his support for a plan to refinance BRL50bn owed by regional governments to the development bank BNDES, alongside the securitization of some of their debt to the National Treasury, Reuters reported. A source told the agency that the refinancing of BRL20bn BNDES debts is "just a step away" and may be ready by September thanks to legislation that facilitates such a deal while the remaining amount will depend on an executive decree.

Actinver, a Mexican financial services firm, tapped the local markets with a five-year bond worth MXN200mn. The proceeds will be used for corporate purposes while Actinver acted as the sole bookrunner.

Asia

Khazanah Nasional Bhd plans to issue the second tranche of a MYR100bn SRI sukuk. Proceeds from the sustainable sukuk, part of a wider MYR1bn programme, will fund the roll-out of a new Trust Schools Programme across Malaysia. The company is also planning on earmarking a portion of the sukuk for domestic retail investors.

The Reserve Bank of India (RBI) outlined fresh plans to direct banks to expedite bankruptcy proceedings for 12 distressed accounts the government believes account for about 25% of the overall gross non-performing loan volumes in the Indian banking system. The move comes just months after the government strengthened the Central Bank's hand by allowing it to directly appoint members to lenders' distressed asset resolution committees.

The government of Cambodia is in the final stages of preparing new legislation to help establish a local corporate bond market. Private sector companies are currently hamstrung by the lack of a local currency bond market to complement its quickly-growing equities market, and are often forced either float shares or secure increasingly costly loans from banks.

The International Monetary fund has raised its forecast for China’s GDP growth to 6.7% for 2017, up from 6.6% previously. The IMF also projected GDP to grow 6.4% annually from 2018 to 2020, according to a statement issued at the conclusion of a mission from the fund to Beijing and Lanzhou from June 1-14, quoted by the FT.

The People's Bank of China is asking lenders in Shanghai to report on how regulatory tightening has affected their lending and credit quality, according to a report in Reuters. The request for more data on sectoral distribution and quality of exposures is said to be in addition to the typical quarterly quality risk assessment executed by the Central Bank.

Indonesia's Central Bank governor said this week that the Bank's goal is to get loan growth to hit between 11% and 13%, according to Reuters. Loan growth in Indonesia currently sits at 9.2%, up from 8.3% in January.

The Exim Bank of China might issue up to US$4bn in euro-and dollar- denominated bonds this year in addition to the US$4bn issued so far, as the Beijing’s Belt and Road initiative drives demand for foreign currency funds. The bank issued US$5.1bn of euro and dollar bonds last year.

Marble II Pte, a technology company based in Singapore, issued international bonds for US$500mn maturing in 2022 with a 5.3% coupon. Notes were sold at a price of 100% with an initial yield of 5.3%. Barclays, Citigroup, Credit Agricole CIB, Credit Suisse, Deutsche Bank, HSBC, ING Wholesale Banking London, JP Morgan, Standard Chartered Bank and UBS managed the deal.

The Export-Import Bank of Korea issued a dual- tranche international bond worth US$300mn. The first tranche was for US$120mn maturing in 2019 with a 3M LIBOR USD + 0.33% coupon. The second part was for US$180mn maturing in 2021 with a 3M LIBOR USD + 0.55% coupon. Bonds were sold at a price of 100% and Citigroup acted as the sole bookrunner.

Russia, CIS & Europe

Russian shares lost 0.6% and Moscow is this year's worst performing emerging equity market in dollar terms, with fresh headwinds emanating from the US, where legislation that could impose new sanctions on Russia, and prevents the White House from easing or ending them without congressional approval, has been passed. Russian assets have also been hurt by oil's 10% decline since late-May and a hawkish Central Bank stance that has allowed the rouble to shrug off crude price weakness.

Russian companies borrowed close to US$13bn in Eurobonds in the first five months of this year, or about as much as they borrowed from international capital markets through all of 2016, according to new research from PwC. In 2015, Russian corporates borrowed US$5.16bn via 10 Eurobond deals, and in 2014 US$10.35bn through 24 deals.

Russia’s Vnesheconombank (VEB) is preparing to collect bids for a US$500mn of 5.5-year exchange bond on Wednesday, according to PRIME agency’s sources, with the first coupon guidance set at 4.25–4.50% annually, corresponding to a 4.30–4.55% annual yield to maturity. The technical placement for the issue is scheduled for June 22, with Gazprombank acting as organizer.

Kazakhstan’s Central Bank announced plans to sell short-term bonds via a mobile platform, which will use blockchain technology to track transactions. "The proposed project will allow citizens to buy and sell the notes of the National Bank online from a mobile phone, bypassing intermediaries, namely brokers and dealers. No taxes and no commissions," the National Bank of Khazakstan said this week. The platform is not dissimilar to M-Akiba, a platform developed by Kenya's Treasury Department for the purpose of selling government securities to retail investors.

The European Bank for Reconstruction and Development (EBRD) is set to loan US$44.5mn to a solar project in Kazakhstan, Global Trade Review reported. The money will go towards the 50MW Burnoye Solar-2 project, in the Zhambyl region in south Kazakhstan. It is the second phase of Kazakhstan’s first utility scale renewable project and is part of a US$200mn renewable energy financing framework the EBRD has pledged for Kazakhstan. The finance is in local currency, with a tenor of 15 years, with additional funding coming from the multilateral Clean Technology Fund in the form of a 20-year loan for US$10mn and the remaining US$35mn from the owners.

Ukraine's government plans to narrow its budget deficit to 2% next year from an expected 3% in 2017, Finance Minister Oleksandr Danylyuk said on Wednesday. "We are introducing a deficit target with a view to reaching a deficit-free budget in the long term," Danylyuk said during a televised cabinet meeting, quoted by Reuters. "In the short term, we plan to reduce the deficit from 3% to 2%."

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