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Emerging Market Credit Daily Roundup: 20 July, 2017

Africa’s central banks expected to begin an easing cycle – Proparco signs US$50mn trade finance guarantee with Ecobank – NMRC to issue second NGN20bn tranche of bond – S&P upgrades Honduras rating – Exxon Mobil fined for violating sanctions against Russia – DBS Group Holdings launches first green bond by a Singaporean FI - Doosan Infracore issued international bonds for US$300mn

Jul 20, 2017 // 6:07PM

Middle East & Turkey

JPMorgan Chase & Co. and Citigroup expect Middle East debt sales to slow for the rest of the year after sovereigns raised a record US$37bn in the first half. Bond sales from the region this year are likely to reach similar levels to last year when US$79bn was sold as long as oil prices remain low, JPMorgan’s Deaibes said, cited by Bloomberg. “If oil remains at this sort of level then we will continue to see governments active in the market and overall deal volumes largely sustained. I don’t think we will go back to previous volumes of around US$25bn of deals until we see a material reduction in governments’ fiscal deficits.”

Saudi Aramco is considering a buyout of partner Jadwa Investment Co.’s stake in a refining company as the private equity firm considers exiting the joint investment, according to sources quoted by Bloomberg. Jadwa’s holding in the business, known as Luberef, could be valued at about US$1bn, the sources added.

The Arab Fund for Economic and Social Development (AFESD) provided a total of nine loans worth US$1.4bn to six Arab nations during 2016. The credit has been used in financing US$6.2bn socio-economic developments, eight of which are new enterprises, said the AFESD, a Kuwait-based pan-Arab development finance institution, in its annual report, quoted by Kuwait News Agency.

Africa

Africa's major central banks are entering an easing cycle as they try to stimulate growth after months of drought, austerity drives and confidence issues across the continent, a Reuters reported on Thursday. Poor business confidence in South Africa and foreign exchange restrictions in Nigeria, as well as the fallout from the El Nino-related drought, have also hampered growth. "We expect that African monetary policy is entering a widespread and protracted period of policy easing. This will provide a boost to growth," said John Ashbourne, Africa analyst at Capital Economics.

French development financier Proparco has signed a US$50mn trade finance guarantee agreement with pan-African banking group Ecobank, according to Global Trade Review. The guarantee package will support the trade operations of four of Ecobank’s subsidiaries in West Africa – Burkina Faso, Côte d’Ivoire, Guinea and Mali – with EBI SA, the group’s France-based subsidiary, thus helping to boost trade between African and European companies.

Mozambique should take steps to address information gaps that remained regarding the use of loans granted to three state-owned companies, the IMF said. The IMF visited Mozambique from July 10-19 to discuss findings of an audit by risk-management firm Kroll into the country's US$2bn in hidden loans to tuna fishing company EMATUM, security firm Proindicus and Mozambique Asset Management (MAM). The audit showed roughly a quarter of the money remained unaccounted for.

A Nigerian court has ordered seven local banks to transfer a total of US$793.20mn due to the government immediately after the lenders withheld funds they collected on behalf of the state, a government lawyer told Reuters. Banks collect grants, taxes and tariffs on behalf of the government which they remit to a single treasury account with the central bank following a policy in 2015 aimed at curbing corruption.

The Nigeria Mortgage Refinance Company (NMRC) will issue the second tranche bond worth NGN20bn to raise additional funds for housing refinancing. The bond is the second tranche of the Series-1 of NMRC 15- year 14.9%t fixed rate under a NGN140bn medium-term note programme due in 2030 and is part of government’s effort to finance the nation’s increasing housing deficit. NMRC also plans to issue to issue a Sukuk of up to NGN2bn before the end of 2017, according to Charles Inyangete, the Company’s Chief Executive Officer.

South Africa's central bank cut its benchmark repo rate by 25bp to 6.75% on Thursday saying a near-term improvement in growth was unlikely but that the inflation outlook had improved.

 

Americas

Brazil is considering a larger spending freeze in 2017 as planned tax hikes to be announced on Thursday are unlikely to cover the budget deficit, a government source told Reuters. The government expects higher taxes on gasoline to help it raise an additional BRL11bn (US$3.50bn) this year, the source said. The government targets a budget deficit of BRL139bn this year before interest payments. Brazil has frozen BRL39 in spending earlier this year to reinforce its commitment to fiscal discipline after losing its investment-grade rating following years of budget shortfalls.

S&P upgraded the both the foreign and credit long- term rating for Honduras from B+ to BB-. According to the rating agency this is due to improved fiscal flexibility and limited debt increases, the outlook remains stable.

A national strike was called on Thursday by foes of President Nicolas Maduro to demand a presidential election and the abandonment of a plan for a new congress they fear would institute dictatorship in Venezuela. In most of South American nation businesses remained shut as the majority-backed opposition staged a 24-hour shutdown from dawn in a civil disobedience campaign it is dubbing "zero hour" to try to end nearly two decades of Socialist Party rule.

Panama’s public debt increased by US$1.24bn in the last year and reached US$22.9bn in June according to data released by the Ministry of Finances.  The external represents 78% of all outstanding obligations and was a total of US$18bn, while the internal obligations were a total of US$4.8bn.

 

Asia

Infrastructure investment firm Susi Partners and environmental solutions company South Pole Group have combined to launch an energy infrastructure fund for Southeast Asia, Global Trade Review reported. The €250mn fund will invest in up to 30 renewable energy projects throughout the region, focusing on Indonesia, the Philippines, Thailand and Vietnam, channelling funds secured from institutional investors.

Total SA is in talks with Myanmar to supply the country’s most populous city, Yangon, with liquefied natural gas, Bloomberg reported. The French energy giant may also build a power plant there as it seeks to expand its footprint in downstream activities like regasification terminals, pipelines and power plants to help create new gas demand and diversify away from oil.

Singapore based DBS Group Holdings launched the country’s first green bond by a financial institution. The US$500mn floating rate green bonds will be issued with a five-year maturity, to yield a quarterly coupon of three-month US dollar Libor plus 62bp.

The International Finance Corporation (IFC), is considering investing US$5-US$6bn towards sustainability projects in India. In an interview BusinessLine, Jun Zhang, IFC Country Manager for India, also said that in the previous financial year, IFC financed US$1.96bn in about 40 projects in India, overachieving its yearly target of around US$1.2bn.

South Korean conglomerate, Doosan Infracore issued international bonds for US$300mn maturing in 2020 with a 2.5% coupon. Notes were sold at a price of 99.859% with an initial yield of 2.56%. BNP Paribas, Korea Development Bank and Standard Chartered Bank managed the transaction.

India’s The Securities and Exchange Board (SEBI) announced foreign investors would be allowed to buy rupee-denominated corporate debt on tap until they reach 95% of the INR2.44trn rupees (US$37.87 bn) allocated to them. Once that 95% limit is reached, however, custodians must halt any foreign investors orders, and the remainder would be sold off under an auction format, India’s market regulators said in a statement. Furthermore, SEBI said that Indian corporate issuers would also be prevented from selling rupee-denominated debt abroad until the foreign ownership in corporate debt falls below 92% of the quota.

China Oceanwide Holdings issued international bonds for USD 400.0m maturing in 2020 with a 7.75% coupon. Notes were sold at a price of 100% with an initial yield of 7.75%. AMTD Asset Management Limited, Bank of China, CITIC Securities International, China Merchants Bank, China Cinda Asset Management, Credit Suisse, DBS Bank, Haitong International securities, HSBC, Morgan Stanley, Quam and UBS managed the transaction.

 

Russia, CIS & Europe

Severstal, one of Russia’s largest steel producers, reported a 20% rise in earnings for the second quarter as the country’s economic recovery boosted domestic demand, but said a strengthening global market was tainted by worries over threats of trade tariffs. Earnings before interest, taxation, depreciation and amortisation rose an annual 19.6% to US$629mn, the company said on Thursday, driven by a 22.2% rise in revenues to US$1.93bn. Both were roughly in line with analyst estimates. Net profit fell 77.6% to US$136mn due to a one-off non-cash charge.

Yields on Greek government bonds rose on Thursday after IFR reported six banks had been hired to arrange Greece's first bond sale in over three years. The Thomson Reuters market news and data service said Greece had mandated Bank of America Merrill Lynch, BNP Paribas, Citigroup, Deutsche Bank, Goldman Sachs and HSBC for a five-year issue. On Thursday, the yields on Greece's outstanding bond maturing in 2019 rose over 20bp to 3.81%, while yields on longer-dated bonds were up 5-10bp, according to Tradeweb data.

The U.S. Treasury Department on Thursday said it was fining global oil company Exxon Mobil Corp US$2mn for violating sanctions on Russia in May 2014. The heads of the company's U.S. subsidiaries signed eight documents between May 14 and May 23, 2014 with Igor Sechin, the head of Russia's largest oil producer, Rosneft, Treasury's Office of Foreign Assets Control said in a statement on its website. Sechin had been blacklisted by the United States just weeks earlier.

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