Middle East & Turkey
The turmoil around Dana Gas' bid to have its sukuk due October 2017 deemed illegal continued this week, with a number of investors growing increasingly concerned about the potential knock on effects on other sukuk instruments. There is consensus growing that while Dana Gas may be right in deeming the sukuk illegal under UAE law, having successfully secured an injunction against future payments on the sukuk, a retroactive ruling from the court might prompt investors to steer away from the asset class.
VIP Turkey Enerji AS, which is owned by Dutch Vitol Group, has earlier this week finalised the €1.368bn acquisition of Petrol Ofisi A.Ş, which was previous owned by Austrian energy giant OMV. The acquisition was partially funded by a dual-tranche US$700mn equivalent loan arranged by Akbank and ING.
Abu Dhabi's sovereign wealth fund Mubadala Development is said to be pulling gout of Etisalat Nigeria, casting a cloud over the company's recent loan renegotiation efforts, and may lead to the company's dissolution, according to local press reports. Nigeria's Premium Times reports that in order to continue running the company, the consortium of Nigerian lenders renegotiating the overdue loan could create a holding company to be approved by the country's telecommunications regulator, which would then resume operations.
Fitch has given Nigeria’s upcoming US$300mn senior unsecured diaspora bonds a ‘B+(Exp)’ rating. “The expected rating is in line with Nigeria’s long-term foreign currency Issuer Default Rating (IDR) of B+. The outlook on the IDR is negative. The rating is sensitive to changes in Nigeria’s long-term foreign currency IDR at ‘B+’ and revised outlook to zero,” the rating agency said. The Nigerian DMO intends to list the bond on the London Stock Exchange.
United Bank of Africa Kenya plans to tap into a recent US$500mn Eurobond issued by its Nigeria-based parent, the company announced. “We see our subsidiary taking advantage of this significant fundraising to support some of the large tickets we have in our pipeline,” the company's Managing Director Isaac Mwige said this week. The bond maturing 2022 was oversubscribed 2.4x.
For the first time since the US election, the iShares MSCI Russia Capped ETF trailed the iShares MSCI Mexico Capped ETF, ending a stretch of outperformance that swelled to more than 40pp in early January, the Financial Times reported. Mexico’s stocks were up 2.6% since Nov. 8, while Russia’s index is down 1%, as of Wednesday’s close, in a complete reversal of last year’s “Trump trade”, where the market anticipated a US trade war against Mexico and a more relaxed stance on Russia.
Chinese power company State Power Investment Corp (SPIC) is said to be in talks with Latin America Power to acquire its Chilean assets for between US$325mn-US$400mn, according to Reuters. The assets were originally ringfenced to be sold to now-bankrupt SunEdison for close to US$700mn, but the deal was halted, leading to a lengthy court battle that concluded last year.
Chile’s Central Bank opted to hold its benchmark interest rate steady at 2.5%, following a steady string of cuts since March. In a statement, the Bank said that it saw international indicators pointing to favourable financial conditions despite some choppiness in commodities, particularly falling oil prices.
Mongolia's Central Bank cut its policy rate by 200bp to 12%, saying inflation had now stabilized around its target and uncertainty surrounding its economy had eased following the IMF support package. It is the first rate cut by the Bank of Mongolia (BOM) this year and the second after a 100bp cut last December.
Mongolia's Khan Bank secured a US$5mn loan from the EBRD to help fund new sustainable energy initiatives in the country.
The Asian Infrastructure Investment Bank has approved a US$150mn loan to the India Infrastructure Fund, which will be used as an equity investment. The lenders are working together to finance infrastructure projects in Indi, Georgia, and a number of other former CIS countries.
The Export-Import Bank of India (EXIM Bank) and the Export-Import Bank of Korea (KEXIM) have signed an export credit partnership that will see the two lenders provide export credit guarantees for up to US$9bn in support for infrastructure projects in India. The lenders will prioritise projects across a range of sectors and applications including smart cities, railway, power and transmission infrastructure.
Microfinance providers could come under further pressure due to high exposure to the rural economy, which was heavily impacted by the demonetisation efforts of 2017, according to India Ratings. “The current upheaval has validated the earlier opinion of borrower overleverage and idiosyncratic and systemic risks (due to political ecosystem) prevalent in the industry,” India Ratings said in a recent report.
Rukun Juang, a Malaysian real estate developer, privately placed US$235.4mn in short-term Islamic floating-rate Islamic notes. The company sold the sukuk, split equally between maturities of one and two years, at a spread of 1.25% over the lead banks’ internal cost of funds. CIMB Islamic Bank and RHB Islamic Bank were joint lead managers for the issue
Chinese real estate developer, Greenland Holding Group issued international bonds for US$500mn maturing in 2018 with a 4% coupon. Notes were sold at a price of 100% with an initial yield of 4.0402%. Bookrunner: Bank of China, Haitong International securities and JP Morgan managed the deal.
Byco Industries Inc. is set to become Pakistan’s biggest fuel maker when it restarts an oil refinery next month that was incapacitated almost two years ago after a fire. The Karachi-based company will resume operations next month and boost output to about 85,000 barrels a day of refined products within three months, Chief Executive Officer Amir Abbassciy said in an interview. Pakistan’s fuel demand will grow between at least by 7% to 10% between now and 2020, he said, quoted by Bloomberg.
Russia, CIS & Europe
Russia has increased its investments in US Treasuries by another US$5.1bn, taking the overall holdings to US$104.9bn – the highest figure in 13 months. The first place is held by Japan. Russia currently ranks 14th among the largest holders of US debt, with Japan leading the race.
The Russian Central Bank cut its key interest rate by 25bp on Friday, pledging more monetary policy easing this year amid a better economic outlook. The CBR tightened the key rate to 9% from 9.25%, in the third consecutive cut this year. "The Board notes that inflation is close to the target, inflation expectations keep declining, and economic activity is recovering," the Central Bank said in a statement.
Purchases of foreign currency to replenish Russia's Central Bank reserves are unlikely this year, Central Bank governor Elvira Nabiullina said on Friday. It would be useful to increase the FX reserves, as long as it doesn't endanger the Central Bank's 4% inflation target set for this year, Nabiullina told a news conference.
Belarus is preparing to launch the roadshow in Europe and the US for its first Eurobond since 2010, after the country’s prime minister Andrey Kobyakov in late 2016 announced plans to tap the debt markets for US$800mn. Notably, the prospectus for the planned dual-tranche 5 and 10-year issuance lists a number of risks associated with Belarus’s debt, including high levels of corruption, currency volatility, geopolitical tensions with the West and its high dependence on the Russian economy and exports, particularly in the energy sector.
Romanian pharmaceuticals company A&D Pharma inked a €177mn syndicated loan this week. The loan was arranged by BRD-Groupe Societe Generale and UniCredit Bank, and carries a maturity of 5-years.
Romanian Globalworth Real Estate Investments issued international bonds for EUR550mn maturing in 2022 with a 2.875% coupon. Bonds were sold at a price of 99.427% with an initial yield of 3.0049%. Deutsche Bank, JP Morgan and UBS managed the transactions.