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Emerging Market Credit Daily Roundup

Q1 sukuk issuance tops US$24.1bn – loan growth in UAE improves – Bahrain FX reserves under pressure – AfDB calls for more funding – Garanti secures dual-tranche syndi loan – Saudi Aramco withholds Zambia loan – Nigeria DMO to issue NGN110bn – Venezuela’s bolivar drops 10% in one week – India’s RBI preps bond issuance - Liberal candidate Moon Jae-in wins SK elections – Russian pension funds invested in failing Peresvet Bank

May 9, 2017 // 5:00PM

 

Middle East & Turkey

New sukuk issuance with a maturity over 18 months from the core Islamic finance markets of the Gulf Cooperation Council (GCC) region, Malaysia, Indonesia, Turkey and Pakistan totalled US$24.1bn in the first four months of the year, according to a note from Fitch. The rating agency said that the heavily oversubscribed Saudi sovereign sukuk placed earlier this year "suggests the main limitation on growth is likely to be the relatively limited pool of potential near-term issuers, rather than limited demand."

Loan growth in the UAE is expected to range between 2-5% in 2017, healthier levels than those seen the previous year, according to Bernd van Linder, Chief Executive Officer of Commercial Bank of Dubai (CBD).  "While the overall liquidity situation has improved from last year, provisions have largely stabilised and the capitalisation levels are strong across the sector," van Linder told reporters at the Bank's headquarters.

The Emirate of Sharjah has confirmed that it has no plans to issue any new debt following on from its January 2016 sukuk, it confirmed this week. “Currently we don’t have any plans for bonds or sukuk issuance in the near future. We will always keep a close eye on market conditions and keep our own financial needs under review,” Tom Koczwara, director, debt management office, finance department at Government of Sharjah told Gulf News reporters.

Bahrain's foreign currency reserves are likely to remain strained as declining oil prices put further pressure on the country to prop up its currency. Bahrain's FX reserves declined 11%, according to Central Bank data, while net foreign assets continued to decline to multi-year lows.

Turkey's Garanti Bank closed a €1.25bn syndicated loan this week. The loan consisted of a US$468mn tranche and a €805.5mn tranche, both carrying a tenor of 1-year.  All-in pricing for the loan was Libor+1.45% for the US dollar tranche and Euribor+1.35% for the euro tranche, with commitments from 38 local and international lenders.

 

Africa

African Development Bank (AfDB) president Akinwumi Adesina has called for more investment to help close a funding gap in Africa that is estimated at roughly US$162bn per year. The AfDB is looking to bolster its "High 5s" initiative, which includes five key development priorities including the development of new infrastructure and deepening of the local capital markets.

African telecoms operators are in for a period of M&A as specialist providers from outside and within the continent look to deliver more mobile services, an M&A adviser has said. “The African TMT vista remains extraordinarily vibrant. Fundamental demand is not in doubt, and neither is exponential growth in demand. This is reflected by telecommunications operators seeking economies of scale. This holds across the mobile sector, the towers sector and the broadband connectivity sector,” said Enda Hardiman, Managing Partner, Hardiman Telecommunications.

Nigeria's Debt Management Office (DMO) plans to sell NGN110bn in bonds across three maturities this week. The government plans to offer NGN40bn in 5-year notes, NGN50bn in 10-year notes and NGN50bn in 20-year notes.

BP has announced the discovery of another large gas field off the coast of Senegal with its US partner Kosmos Energy, five months after BP agreed to invest US$1bn in an alliance with Kosmos to develop resources spanning the maritime border of Senegal and Mauritania.

Nigeria’s naira has falling to levels weaker than the black-market rate in a foreign-exchange window set up for international investors and hedge funds last month, as dollar shortages continue to plague Africa’s biggest economy. According to Bloomberg, funds including Chicago-based Frontaura Capital, South Africa’s Allan Gray Ltd. and Duet Asset Management Ltd. of London have bought and sold the currency at levels as much as 6% weaker than where it trades in back-alley shops.

Saudi Aramco has reportedly withheld a US$20mn loan to Zambia due to the eroding political and economic environment, according to local press reports. Zambia's Energy Minister David Mabumba said the country has not been able to secure the loan because a guarantee on the proceeds was not yet authorised by the Central Bank or the Ministry of Finance.

 

Americas

The bolivar fell 10% in the past week and reached VEF5,000 per dollar, a new record low for the southern currency. The devaluation of the bolivar comes in the backdrop of the escalation social protest against the government of socialist, Nicolas Maduro.  Inflation in crisis driven economy is expected to reach 720% this year.

Brazil's Amapa governor Waldez Goes has called on the federal government to set up a line of credit to support renewable energy development in the country's Amazon region. The proposal would see the Amazon Bank (Basa) offer credit to developers in Brazil's North East, where there are currently a number of new wind projects being proposed.

 

Asia

India's Central Bank is prepping a INR150bn bond sale, which is scheduled to take place on Friday. The bank plans to sell INR30bn in notes due 2024, INR80bn in notes due 2027, INR20bn in notes due 2034, and 20bn in notes due 2046.

Korean lender, Woori Bank issued international bonds for US$500mn with a 5Y UST Yield + 3.3347% coupon. Notes were sold at a price of 100%.  While BNP Paribas, Citigroup, HSBC, JP Morgan, Mitsubishi UFJ Financial Group, Nomura International, and Societe Generale managed the deal.

Hong Kong based Bank of Communications issued a two-tranche international bond worth US$ 1bn. The first issuance was for US$300mn maturing in 2022 with a 3M LIBOR USD + 0.88% coupon.  While the second was for US$700mn maturing in 2020 with a 3M LIBOR USD + 0.78% coupon. Agricultural Bank of China, ANZ, Bank of China, Bank of Communications, Citigroup, HSBC, KGI Securities, Shanghai Pudong Development Bank, and Standard Chartered Bank managed the deal.

Perusahaan Listrik Negara, an Indonesia electricity company, issued two international bonds for US$2bn. The first notes worth US$1.5bn are set to mature in 2027 and carry a 4.125% coupon. While the remaining US$500mn tranche will mature in 2047 with has a 5.25% coupon. Citigroup and HSBC acted as joint bookrunners for the deal.

The IMF has raised its growth forecast for the ASEAN region to 5.5% in 2017, from an earlier expectation of 5.35, but warned that the near-term outlook for the region is “clouded with significant uncertainty”, adding that medium-term growth could be impacted by a slowdown in productivity growth in advanced economies and China.

Ping An Insurance issued a HK$1.5bn international bond maturing in 2022 with a 3.8% coupon, with China Silk Road International Capital, Haitong International securities and Ping An Bank selected as bookrunners.

Liberal candidate Moon Jae-in has claimed victory in South Korea's presidential election. While official results have not been released at the time of writing, an exit poll conducted jointly by three network TV stations had put him on course to get 41.4% of the vote, with his nearest challenger, conservative Hong Joon-Pyo, on 23.3%. Mr Moon favours greater dialogue with North Korea, in a change to current South Korean policy, with some raising concerns that his policies could clash with those of the new US administration.

 

Russia, CIS and Europe

Russia non-government pension funds held around RUB15bn of the ailing Peresvet bank’s bonds as it went into administration. The country’s 47th bank by size, which is struggling to plug a RUB100bn+ budget hole, has been a constant headache for the Central Bank. The CBR is currently in process of agreeing bail-in terms with over 70 of Peresvet’s creditors, and is itself expected to contribute RUB66.7bn to keep the Orthodox Church Bank afloat. According to analysts questioned by Russia’s RBC channel, the volume of notes held by pension funds will prove to be a serious stress-test for the country’s pension system.

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