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Emerging Market Credit Daily Roundup

Russian Central Bank lowered benchmark rate to 9.25% - IMF to resume US$1.6bn loan talks with IMF in May – Jordan issued a US$500mn Eurobond – Norilsk Nickel files US$271mn lawsuit against Botswana for failed Nkomati mine sale - Brazilian Development Bank and NDB to provide joint US$300mn loan to Brazil’s renewables sector - Malaysian RHB Islamic Bank Bhd issued a RM250mn subordinated sukuk murabahah - China Southern Power Grid issued a US$600mn international bond

Apr 28, 2017 // 4:18PM

Middle East & Turkey

The Kingdom of Jordan issued US$500mn worth of Eurobonds with a yield of 5.875%. The bonds are due in 2026 and received orders for more than US$1.7bn, or more than 300% of the issuance value. This sale is part of a cash flow plan designed to secure financial needs in accordance with the public debt strategy aimed at diversifying sources of finance and reducing borrowing costs, as well as increasing the maturity dates of the public debt portfolio. The transaction was managed by J.P. Morgan and Citigroup.

Changes in UAE bankruptcy laws are expected to boost investment in the country, according to banking experts present at the Emirates Institute for Banking and Financial Studies (EIBFS) conference in Dubai. The new commercial companies law and the insolvency law could become key steps to positioning the UAE as a favourite destination for investors and creating a business-friendly environment in the country.

The Nigerian arm of Abu Dhabi telecom group Etisalat is meeting lenders in London for talks on restructuring a US$1.2bn debt, Reuters reported. Etisalat Nigeria is the biggest foreign-owned victim of the dollar shortages plaguing Nigeria's financial system. It signed the US$1.2bn medium-term facility with 13 local banks in 2013 to refinance a US$650 million loan and fund the modernization of its network, but is now finding it difficult to repay the debt.

Africa

The International Monetary Fund will send a mission to Zambia in May to reignite talks over a possible US$1.6bn loan the government is seeking after they failed to reach a deal in Washington this month. “Progress was made but program discussions have not yet been concluded,” Alfredo Baldini, the fund’s representative in Zambia, told Bloomberg. “The authorities and IMF staff have agreed that a mission will return to Zambia at the end of May to continue the discussions.”

Rwanda plans to increase government spending by 7% in the 2017/18 (July-June) fiscal year to RWF2.09tn (US$2.53bn), the finance minister said on Friday. Claver Gatete told parliament while presenting the draft budget that 17% of the budget will be funded by donors with the rest coming from revenue and debt. The government expected to collect RWF1.32tn in revenue during the year, the minister said.

South Africa's rand bounced back from a one-week low on Friday, lifted by dollar investors banking profits ahead of the weekend and the European Central Bank's decision to stick to its large-scale bond buying binge.

Zimbabwe’s finance minister claimed on Thursday the country has met all conditions to clear arrears to the World Bank and African Development Bank, paving the way for possible future funding from the IMF. The southern African nation in October last year cleared its 15-year-old financial arrears to the amount of US$1.75bn with the IMF, in a major step towards its first loan programme with the Fund since 1999.

Russia's Norilsk Nickel said on Friday it had filed a lawsuit against the government of Botswana to try to recoup US$271mn plus damages it says it is owed from the aborted sale of a 50% stake in the Nkomati mine in South Africa. Botswana's state-run BCL Mine pulled out of a BWP3bn (US$281mn) deal in October last year to buy a 50% stake in Nkomati Nickel Mine from Norilsk due to lack of funds.

Americas

Brazilian unions are leading a nationwide strike to protest President Michel Temer's austerity measures. Public transport stopped functioning in several major cities, while factories, businesses and schools remained closed. In Sao Paulo, Rio de Janeiro and several other metropolitan areas, protesters used barricades of burning tires and other materials to block highways and access to major airports.  Many workers were expected to heed the call to strike for 24 hours starting just after midnight Friday, due in part to anger about progression this week of congressional bills to weaken labour regulations and efforts to change social security that would force many Brazilians to work years longer before drawing a pension, Reuters reported.  This will be Brazil's first general strike in more than two decades.

Mexican bread producer Grupo Bimbo announced on Thursday its first foray into the African market with the purchase of Adghal, its Morocco-based counterpart. While financial details were not provided, Adghal recently reported sales of some US$11mn, according to Bimbo statement.

The New Development Bank, jointly founded by the BRICS countries, and the Brazilian Development Bank have decided to provide a US$300mn loan to develop Brazil’s renewable energy sector. The loan has been sanctioned to facilitate sustainable development of energy infrastructure of Brazil through investments in at least five renewable energy and associated transmission projects.

Moody’s Investor’s Services, which has had Mexico’s sovereign ratings on watch for possible downgrade, upheld its A3 rating. The rating agency, which also upheld state energy company Pemex’s Baa3 rating, said a key determinant had been the “clear reduction” of a risk that Pemex’s finances could suffer a shock. It maintained the negative outlook, however, because of the lingering Nafta risk and the impact of any change to US trade policy on the country’s fiscal consolidation.

According to Moody’s, Argentina’s -B3 positive sub-sovereigns are on track to record modest gross operating surpluses in next 2 years, as stronger economy helps support their revenue. The rating agency also expects a pick-up in real GDP growth of 3% in 2017 and 2018.

Puerto Rico's financial oversight board approved a fiscal plan for the struggling U.S. territory's Government Development Bank (GDB), the island primary fiscal agent. The oversight board was also expected to consider fiscal turnaround plans for Puerto Rico's highway and water authorities as well as power utility PREPA. The GDB has been a shell entity since April 2016, when Puerto Rico's former governor declared a state of emergency at the bank. The lender defaulted on US$422mn of debt the following month.

Asia

Sri Lanka will raise US$2.5bn through bonds and syndicated loans amid delays in securing the latest instalment of an International Monetary Fund (IMF) bail-out. The island is hoping to issue about US$1.5bn in bonds by June, while nearly US$1bn extra will come from a syndicated loan to be raised in late May.

Malaysian RHB Islamic Bank Bhd issued a RM250mn subordinated sukuk murabahah, its first bond issuance in about three years. The AA3 sukuk will have a 10-year maturity and a profit rate of 4.88%. RHB said proceeds raised from the sukuk issuance would be used for RHB Islamic’s syariah-compliant working capital and general banking purposes.

Chinese company SOCAM Development issued international notes worth for US$200mn maturing in 2020 with a 6.25% coupon. Bonds were sold at a price of 100% with an initial yield of 6.25%, with DBS Bank and UBS managing the deal.

Singapore’s unemployment rate rose to its highest since 2009 in the three months to March as the number of work permit holders dropped, according to preliminary data from the Ministry of Manpower, quoted by the FT. The overall unemployment rate in the city state including foreigners rose to 2.3% in the first quarter from 2.2% in the three months to December, while the unemployment rate for Singapore residents and citizens held at 3.2% and 3.5% respectively, according to Bloomberg.

China Southern Power Grid issued a US$600mn international bond maturing in 2022 with a 2.75% coupon. ANZ, Bank of China, China International Capital Corporation (CICC), HSBC, JP Morgan and UBS were picked as bookrunners on the deal.

Taiwan’s economy expanded for a fourth consecutive quarter in the three months to March, lifted by domestic consumption and an increase in exports driven by overseas demand for electronic components. GDP for the first quarter grew 2.56% year-on-year, according to Taiwan’s Directorate-General of Budget, Accounting and Statistics, following 2.88% year on year in the three months to December.

Moody's affirmed Vietnam’s B1 sovereign rating, upgrading its outlook from stable to positive on expectations that strong foreign direct investment inflows will continue to diversify the economy.

Russia, CIS & Europe

Russia's Central Bank cut its key interest rate on Friday for the second time this year and hinted at more cuts to come as inflation, already at a post-Soviet low, continues to fall. The CBR reduced the key rate to 9.25% from 9.75% – on the dovish side of last week’s prognosis by its governor, Elvira Nabiullina, to cut by 25 or 50bp.The central bank reaffirmed commitment to its previous plan of making gradual rats cuts in the second and third quarters of this year.

The Moscow Exchange is set to introduce a regulatory change that would allow for trading in oil derivatives, announced its chief, Alexander Afanasiev. According to Afansiev, these changes could be implement through coordination with SPIMEX, Russia’s largest commodities exchange, which is based in St Petersburg. Meanwhile, the head of the SPIMEX Alexei Rybnikov recently announced that 5.4 million tons of oil products were sold at the exchange trades during the first several months of 2017, “7% more compared to the same period of 2016”.

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