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Emerging Market Credit Daily Roundup

UAE banks squeezed on interest rates – Bank Sohar secures fresh US$250mn syndi loan – Citigroup gets Saudi banking license – Yapi Kredi heads for euro covered bonds – Uganda, Tanzania top investor favourites in East Africa – South Sudan secures World Bank loan – Brazil debt rises 3.2% in March – Argentina’s Corboda retaps 2026s – NHAI to debut masala bonds this year – Rusal tightens guidance on 6-year Eurobonds

Apr 25, 2017 // 4:14PM

 

Middle East & Turkey

Abu Dhabi National Energy (Taqa) had its credit rating cut one level to A- by Standard & Poor’s, which cited what it sees as increased risks to state support for the utility company. Standard & Poor’s downgraded Taqa’s rating from A and revised the outlook for the company’s debt to “negative” from “stable”

Banks in the UAE have been temporarily reducing interest rates in a bid to grow their deposit base and stimulate asset growth. Some banks have been see offering retail loans at rates as low as 2.19%, below one-year Eibor - which has risen from 2.12% to 2.22%, according to data from Markaz. The UAE Central Bank raised interest rates last month to 1.75%, up from 1.5%, after the US Federal Reserve hiked rates that month.

Challenging economic conditions in Oman hit expatriates particularly hard last year, according to data from the Ministry of Manpower. About 43,000 expats working in the private sector lost their jobs in 2016, about 12% higher than the previous year.

Bank Sohar has secured a US$250mn 3-year syndicated term loan facility this week. The Omani lender chose Bank ABC to lead the transaction, with Abu Dhabi Commercial Bank, Axis Bank and Commerzbank joining in the general syndication stage. The bank last hit the capital markets in September last year when it launched a OMR35mn Tier 2 subordinated bond. Proceeds from the loan will be used for general corporate purposes.

Dubai has more sukuk listed than any other market, with US$53.31bn in value, after a series of big moves in the past year. Global Sukuk issuance reached US$72.9bn globally in 2016 according to RAM Ratings Services, with Islamic finance assets as a whole valued at more than US$2tn.

Abu Dhabi's state-owned IPIC and 1Malaysia Development Berhad (1MDB) have resolved a dispute related to the Malaysian fund's now infamous money laundering case. Under the terms of the US$1.2bn agreement IPIC, which had guaranteed bonds issued by 1MDB, will now see responsibility for those bonds assumed by Malaysia’s Ministry of Finance.

Citigroup Inc. was granted an investment banking license from Saudi Arabia’s Capital Market Authority (CMA) more than 10 years after exiting the kingdom. The CMA board authorized Citigroup Saudi Arabia "to conduct dealing as underwriter, arranging and advising in securities business activities," according to Bloomberg. The firm lost its banking license when it sold its stake in Samba Financial Group in 2004.

Saudi Arabian water and power project developer ACWA Power is pushing ahead with plans to raise up to US$600mn through the sale of senior secured debt in both conventional and Islamic formats, according to Reuters. ACWA originally planned the sale for November last year, but the transaction was postponed due to market volatility which followed the US election.

Turkey's Yapi Kredi general management board has authorised the sale of €1bn in mortgage backed covered bonds, according to a report from Reuters. The bond would be the country's second euro-denominated mortgage-backed covered bond ever, following Vakif's landmark transaction last year.

Turkey's Ziraat Bank has set final price guidelines of planned five-year US dollar bond at 5.25% -5.37%, Reuters reported. Order books for the issuance, which is expected to be of benchmark size, were in excess of US$1.3bn. Bank of America Merrill Lynch, Citi, Emirates NBD Capital, Erste and JP Morgan are acting as joint bookrunners.

 Africa

The African Development Bank has added Zambia and Ghana to its African Bond Index, part of its efforts to stimulate the development of the local capital markets. The Index currently contains local currency sovereign debt from South Africa, Egypt, Nigeria, Kenya, Botswana and Namibia. "We are delighted to welcome Zambia and Ghana to the index and expect to include more countries to it as soon as reliable pricing information is made available," said Stefan Nalletamby, Director of the AfDB's Financial Sector Development Department.

Uganda and Tanzania have topped the "most attractive investment destinations" list for countries in East Africa, according to the Africa Index. The countries scored particularly high on domestic investment, ease of doing business, and economic growth. These countries were followed by Egypt, South Africa, and Zambia.

South Sudan secured US$106mn from the World Bank and the African Development Bank(ADB), in part to pay for food imports as millions face starvation, and to fund the construction of a road to trade partner Kenya. Finance Minister Stephen Dhieu Dau told Reuters that the government had signed a deal with the World Bank for a US$50 million grant "to meet the food gaps in South Sudan" and had separately agreed on a loan worth US$48mn with ADB to help strengthen the recession-hit economy.

A 50-MWp Abiba Solar project in Nigeria being developed by Access Power and EREN Renewable Energy (EREN RE) has secured a US$1.65mn loan from InfraCo Africa. The convertible loan will be used to help finance the final stage of the project's development.

Nigeria's Central Bank offered US$150mn in currency forwards at an auction on Monday, it said in a statement, quoted by Reuters. The move is part of the CBN’s efforts to narrow the spread between official and black market exchange rates and improve foreign exchange liquidity. The Bank has been intervening on the official market since February and has sold as much as US$4bn, analysts estimate.

Nigeria's commercial hub, Lagos State, has redeemed NGN57.5bn (US$183mn) worth of local currency bonds it issued seven years ago, it said on Tuesday. Finance Commissioner Akinwunmi Ashade, quoted by Reuters, said the state was paying off its debts to create space for new issuance to raise funds for infrastructure investment, adding that the country saved more than NIN103bn in a sinking fund to redeem bonds maturing in 2019, 2020 and 2023.

Sate-owned Egyptian lender Banque Misr has secured a series of large financing packages from Chinese banks, with the Chinese Development Bank agreeing to lend US$500mn with an eight-year tenor, which will be used to “finance strategic projects” in Egypt. Last year Banque Misr received a five-year loan from CDB which was worth US$100mn. Additionally, the Egyptian lender has signed a US$100mn loan agreement with the Industrial and Commercial Bank of China (ICBC), which will be used to fund a Huawei-led project in Egypt.

Americas

Brazil’s government debt rose 3.2% in March, despite the continued reduction of the country's key interest rate, underscoring the urgency for centre-right President Michel Temer to cut spending. The nation's debt, including local and overseas bonds, totalled BRL3.23tn (US$1.03tn) at the end of March, up from BRL3.1tn the month before, said the national treasury.

Brazilian state development bank BNDES has hired Bank of America Merrill Lynch, Credit Agricole and JP Morgan to help the bank launch its first green bond. BNDES, which already co-runs a green bond investment fund, is said to be readying a benchmark sized issuance that could price as early as Friday.

Chile could cut interest rates further if weakness in the labour market persists, the Central Bank board president said this week. In an interview with Bloomberg Mario Marcel said further declines in the construction industry has put a damper on salaried work in the country, which could lead to another rate cut. The Central Bank cut interest rates in April, the third time this year, as the economy was on the cusp of a recession.

Argentina's Province of Corboda reopened its 2026s to price US$150mn in additional notes. The notes were sold at a yield of 6.8%, representing a tightening of 32.5bp from the 7.12% yield they were issued at in October 2016, according to local press.

Asia

Singapore's Temasek Holdings-owned Fullerton India is preparing a private placement with the IFC, according to local press reports. The non-banking financial corporation is looking to raise up to US$100mn from the sale, with the notes carrying a 3 to 5-year tenor.

India's Central Bank governor Urjit Patel suggested the bank could raise interest rates alongside other emerging markets. Patel, who is known to be hawkish, said that despite a broad upswing in global growth, emerging markets have generally set off on a path of increasing interest rates, which could prompt the RBI to tighten in the coming months - as long as it doesn't have a deep impact on credit creation.

State-owned SBI and realtors’ body CREDAI have signed an MoU that will see the two offer concessional loans for the development of affordable housing projects, they announced this week. Member companies of CREDAI will be eligible to secure loans at a 10-35bp discount to help build affordable housing and green housing projects.

India's HPCL-Mittal Energy hit the international capital markets this week to place US$375mn in fresh notes. The notes maturing 2027 were priced at par to yield 5.25%. ANZ, Citigroup, JP Morgan, SBICAP Securities, and Standard Chartered Bank managed the sale.

The National Highways Authority of India (NHAI) will look to raise between Rs 5,000-10,000 crore (approx. US$778mn-1.5bn) via the sale of Masala bonds, its first bid to raise funding oversees. NHAI said it will hit the road next month, with investor meetings lined up in Singapore, London and Hong Kong.

Indonesia sold IDR17tn of bonds at an auction, above the indicative target of IDR15tn, Reuters reported. The T-bills maturing in July 2017 had a weighted average yield of 4.92%. The T-bills maturing in January 2018 had a weighted average yield of 5.64%. The weighted average yield for bonds maturing in May 2022 was 6.69% percent. The bonds maturing in May 2027 had an average yield of 7.05%. while the ones maturing in May 2036 had an average yield of 7.73%.

People’s Bank of China announced that overseas entities held RMB830.2bn of domestic bonds as of end-March, up from the previous month's RMB815.3bn. Overseas entities also held RMB776.8 bn of domestic equities at the end of March, compared with RMB743.1bn yuan a month ago, according to data from the central bank.

Russia, CIS and Europe

Russian Aluminium giant Rusal has tightened guidance on its 6-year US dollar denominated eurobond offering to 5.325% following a roadshow in London this week.  Citi, Credit Suisse, Gazprombank, JP Morgan, Renaissance Capital, Sberbank CIB, Sovcombank and VTB Capital are arranging the sale.

HC Metalloinvest priced an upsized US$800mn bond this week. The iron ore producer priced the notes maturing 2024 at par to yield 4.85%. Bank of America Merrill Lynch, Credit Suisse, Gazprombank, ING Wholesale Banking London, Sberbank CIB, Societe Generale, and VTB Capital managed the sale.

Russia's finance ministry announced that it will start selling treasury bonds to households from tomorrow, borrowing directly from ordinary Russians for the first time. According to Reuters, the ministry will offer an initial RUB15bn worth of "OFZ bonds for people" using the retail networks of Russia's biggest banks, Sberbank and VTB bank. The three-year bonds will pay a semi-annual coupon which rises by 50 bps every six months, from an initial 7.5% t to 10.5% by the time they mature. The finance ministry has said the bonds will help Russian citizens save and invest and offer them an alternative to keeping money in the bank.

The Russian Central Bank is setting the stage for a nationwide reform of the audit market, which it hopes will help to cleanse and regulate the industry more effectively. According to new legislation it put forward, the Central Bank will assume a large number of regulatory functions currently held by the Finance Ministry and the Treasury, including oversight in the mandatory audit sphere. The move is expected to raise average price of auditing services across the grid and make the industry more effective by pushing the more unscrupulous and unreliable players out of the market.

 The Russian Finance Ministry announced plans on a legislative level to allow for Russian non-banking sector corporates to issue perpetual bonds. Up until recently only banks could issue perpetual debt instruments in Russia, but that will change with the first package of legislative amendments, which is currently under final review. Russian rail giant RZD is expected to be one of the first corporates to tap the markets with a perpetual bond when the law passes.

Russia’s Alfa-Bank has set the guidance for the first coupon rate of RUB5bn 15-year bonds at 5% annually, Russian agency Interfax reported Tuesday, which corresponds to a 5.06% annual yield to maturity. The technical placement is scheduled for May 12.

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April / June 2020

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