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Emerging Market Credit Daily Roundup

Egypt inflation continues falling – OETC hits the market with benchmark issuance – Oman in talks for US$3.6bn with Chinese lenders – Aktif Bank prices US$118mn Eurobond – Tunisia preps inaugural sukuk – Nigeria looking for US$5.2bn from donors and concessional lenders – Chile’s Enjoy SA prices Eurobond – Argentina mulls executive order on capital markets reform – HDFC prices largest AT1 perpetual in India – Kazakhstan continues with divestment efforts

May 10, 2017 // 5:24PM

 

Middle East & Turkey

Egypt’s inflation rate fell for a third month, giving the government breathing room as it prepares to accelerate reforms that caused prices to surge and weakened the pound by more than half against the dollar. Consumer prices rose 1.7% in April from a month earlier, the slowest pace since October before the Central Bank floated the currency and raised interest rates.

Oman Electricity Transmission Company issued international bonds for US$500mn maturing in 2027 with a 5.196% coupon. Notes were sold at a price of 100%. Bank Muscat and JP Morgan acted as joint bookrunners.

Oman is looking to raise up to US$3.6bn from a group of Chinese lenders, according to Reuters. The unsecured deal, which is being managed by Bank of China, China Development Bank, and Industrial and Commercial Bank of China, will carry a tenor of 5-years and all-in pricing of LIBOR+190bp.

A delegation of Bahraini businesses is currently in India trying to shore up further support for bilateral trade. A group of about 15 Bahraini businesses are participating in the week-long meetings, aimed at attracting more Indian companies to invest in Bahrain. Trade between the two nations has been on the decline since 2010.

Saudi Arabia may decide to tap the market in the fourth quarter this year. The size of the issuance will depend on market conditions and investor appetite but could potentially be as much as US$10bn, said the kingdom’s vice minister of economy and planning, Mohammed Al Tuwaijri in an interview with Bloomberg News. Domestically, the government still plans to raise about SAR70bn this year. "We believe actually the banks are pretty liquid nowadays and their ability to invest in government bonds is good," he added.

The Turkish Statistical Institute announced industrial production indices for March 2017. Calendar adjusted industrial production index increased by 2.8% in March 2017, compared to the same month of 2016. On a monthly basis, seasonally and calendar adjusted industrial production increased by 1.3% in March 2017.

Gross financing and refinancing requirements for Turkish entities stands at about US$180bn for 2017 according to figures from Ziraat Bank. A handful of Turkish banks have already raised more than US$3.2bn in the international capital markets, but issuance from the country's corporates has been fairly subdued by comparison.

Turkish Aktif Bank issued international bonds for US$118mn maturing in 2024 with a 7% coupon.  The notes were sold at a price of 100% with an initial yield and Aktif Bank acted as the sole bookrunner.

 

Africa

Financial Sector Deepening Africa (FSD) and KFW Development Bank reached an agreement that will see the Kenya-based lender invest £15.3mn in the Africa Local Currency Bond Fund (ALCBF). This transaction will increase the fund’s investment power and enable it to step up its engagement with the development of important industry sectors such as green energy and housing, and take on investments in fragile and conflict affected states.

Tunisia is working with the Tunisian stock exchange, Bourse de Tunis, and Nasdaq Dubai on its first sukuk issuance, according to a statement issued by Nasdaq Dubai. The potential sukuk will be aimed at both domestic and international investors. Tunisia needs about US$2.85bn in external funding in 2017 and plans to issue a sukuk, or Islamic bond, of US$500mn to cover its budget deficit, according to data from Reuters.

Nigeria is looking to cement a US$5.2bn funding package from the World Bank and the IMF, which will be used to finance the country's power infrastructure deficit. The funding package is said to include a US$1.3bn loan from the IMF for power distribution projects, and a Multilateral Investment Guarantee Agency (MIGA) loan worth US$1.4bn. The Transmission Company of Nigeria (TCN) has already secured about US$1.5bn from donor agencies to finance new power projects in Ogun State and other parts of the country.

Talks between the Nigerian subsidiary of Etisalat and some of its main lenders over a US$1.2bn loan payment default have stalled, according to Reuters. The news agency reported that bankers are looking for a straight equity injection as part of the planned restructuring, but it isn't clear whether Etisalat is willing to move forward with that option.

South Africa needs to provide policy clarity to boost investor confidence, Finance Minister Malusi Gigaba said Tuesday. "We know that we need to continue acting conscientiously to do what we have to do, including providing policy clarity on a number of areas ... to boost business and investor confidence," Gigaba told parliament's finance committee, according to a report in Reuters.

Lawyers for South African President Jacob Zuma on Wednesday sought to appeal a High Court order directing him to provide reasons for his decision to fire finance minister Pravin Gordhan in a cabinet reshuffle, eNCA television said. Gordhan's firing led to sovereign debt downgrades, large street protests and calls for Zuma's resignation.

Transnet's recent failed bond issuance signals continued unease with South African credits, particularly those linked with the government. The state-owned logistics company only managed to raise ZAR55mn out of a planned ZAR600mn bond issuance this week.

 

Americas

Banco Latinoamericano de Comercio Exterior (BLADEX) announced the closing of a US$120mn 3-year senior unsecured syndicated loan for GMG Holding S.A (Grupo Monge). Bladex was the Sole Lead Arranger and Bookrunner, and Administrative Agent for the Facility. Proceeds from the facility will be used to refinance GMG’s existing debt and extending the group's debt maturity profile. The transaction attracted the interest of 15 financial institutions from Panama, Costa Rica, Colombia, Guatemala, El Salvador, Curacao, Dominican Republic, and the United States.  It was 1.2 times oversubscribed, which allowed the Group to upsize the facility amount to US$120mn from its original target of US$100mn.

Chilean hotel and casino operator Enjoy SA hit the international markets for a US$300mn bond this week. The notes maturing 2022 were priced at par to yield 10.5%. Banco Bilbao (BBVA), BTG Pactual, Credit Suisse, and Morgan Stanley managed the trade.

BNDES announced it has finalised the issuance of a US$1bn green bond in the international markets. The bonds will reach maturity in 2024 and carry a 4.80% coupon. Demand reached US$5bn in orders, with 370 investors taking part. The proceeds will be allocated for the financing of environmentally sustainable projects, which in the bank's case concerns new or existing wind and solar power plants within its portfolio, the lender said in a statement.

Inflation in Brazil fell to a near 10-year low last month as easing food costs and the recent strengthening of the real against the dollar helped push the pace of price growth below government target for the first time since August 2010. Consumer prices fell to 4.08% in the 12 months to the end of April, according to the FT, down from 4.57% the previous month and a bigger drop than the 4.1% expected by the market.

Brazil plans to invest BRL59bn (US$18.50bn) in public funds by the end of 2018 to accelerate the economic recovery and bolster ageing infrastructure, newspaper Valor Econômico said on Wednesday. More than a third of that, or BRL22.7bn, would fund transportation projects, such as highways, railroads and airports, the report added, citing documents presented to ministers on Tuesday. The remaining funds would be distributed among three areas: housing, sewage and urban transit; defence; and health, education, water projects, tourism and sports.

Aloysio Nunes Ferreira, Minister of External Relations of the Federative Republic of Brazil, is in Africa this week as he looks to bolster regional relations. The Minister is currently wrapping up a trip to Botswana, where he met with the country's Minister of International Affairs and Cooperation, Minister for Presidential Affairs, Governance and Public Administration, Minister of Health and Wellness, and the Minister of Agricultural Development and Food Security.

Argentina's Central Bank maintained its monetary policy rate at 26.25% for the second consecutive policy decision, saying estimates and data from state and private sources suggest inflation will resume its decline in May while it was higher than hoped for in April. The Central Bank of Argentina (BCRA), which surprised many economists by raising its rate by a sharp 150bp on April 11, said a recent poll of analysts showed that expectations for general inflation in 2017 declined to 21% from 21.2% in March, which is still above BCRA’s 2017 target of 12-17%.

Argentina’s President is assessing the possibility of signing an executive decree that will reform the country’s capital markets. According to La Nacion, the centre-right president Mauricio Macri has been analysing this possibility after he was unable to get the Congress – controlled by the opposition – to approve the much-needed reforms. The government fears that if the reforms are not implemented on time, they risk losing the cash that entered the country through the tax amnesty to capital markets in other jurisdictions.

Puerto Rico is set to meet its creditors for the first time in court on May 17 in San Juan before US District Judge Laura Taylor Swain to begin restructuring the island’s US$74bn debt. The hearing will be the first time the commonwealth, hedge funds, bond insurers and mutual funds will meet in court since the island’s federal control board put the territory under court protection on May 3 to address US$74bn in debt and a US$49bn unfunded pension liability.

 

Asia

HDFC Bank, India’s second-largest private lender, announced it has raised INR80bn in Tier-I (AT1) bonds through a private placement in National Stock Exchange. The perpetual bonds, which have no maturity date, carry a coupon of 8.855%, the lowest pricing on such debt issued by any Indian lender in 2017. This is likely to be the biggest offering of perpetual debt as the bank seeks to raise capital after the profitability has been slower than its trademark 25-30% growth rate over the last two decades.

China's government is planning to open the doors wider than ever to foreign investment in the country's US$3tn bond market, in part to help shore up the struggling yuan, Reuters reported. However, the currency is also proving to be a major barrier to the success of the country’s plan. Foreigners own less than 2% of China's US$3.3tn in outstanding bonds and say getting their cash out of China and recent weakness of the closely controlled currency are obstacles to investment. Since last year the country has been opening up its bond market and liberalizing its financial derivatives market, aiming to draw fresh capital into the country.

China’s CK Hutchison Holdings Limited issued international bonds for US$1bn with a 5Y UST+2.07% coupon. Notes were sold at a price of 100%. Bank of America Merrill Lynch, Credit Agricole CIB, Goldman Sachs and HSBC managed the deal.

Sir Lanka's Central Bank Governor Indrajit Coomaraswamy said this week that the Bank will aim to reduce overall credit growth to 15% year on year by the end of 2017, down from 18% the previous year. In other matters, Coomaraswamy confirmed that the country would receive a US$450mn syndicated bridge loan to help refinance existing debt. Bank of Baroda, Deutsche Bank, Indian Bank, Qatar National Bank, SBI and SMBC arranged the loan.

Foreign investors’ holdings of Chinese onshore notes rose to CNY772bn (approx. US$112bn) in April, from CNY762bn yuan in March, according to figures from Bloomberg.

New regulations in India on the resolution of bad loans is credit positive, but does not address the key structural issues plaguing the banking sector, according to a recent Moody's note. The government recently introduced two new banking law amendments that give banks and regulators more control over how non-performing assets are deal with. “These measures improve the efficacy of NPL resolution mechanisms and are a credit positive. However, they do not address the lack of capital at the state-owned banks that has prevented them from writing down NPLs to realistic levels,” the rating agency said. "Successful resolution, either through debt relief or asset sale, will require banks to take a big hit when they write-down the value of these assets to market value."

Korea Expressway issued international bonds for CHF230mn maturing in 2024 with a 0.25% coupon. Bonds were sold at a price of 100.243% and UBS managed the deal.

 

Russia, CIS and Europe

Royal Dutch Shell on Wednesday urged oil pricing agency S&P Global Platts to protect the dated Brent crude benchmark from declining North Sea supply by including other grades, such as Russian Urals, in its price-setting process, according to Reuters. The suggestion marks a shift from two years ago when Shell said adding Urals would not be "worth the trouble". The benchmark, based on light North Sea crude grades, is used to price about two-thirds of the world's oil but a decline in North Sea output has led to concerns that physical volumes could become too thin and prone to large price swings.

Kazakhstan will sell stakes in its flag carrier Air Astana, state oil and gas company KazMunaiGas and state nuclear firm Kazatomprom by 2019 at the latest, as part of the privatisation drive, the country's Finance Bakhyt Sultanov said on Wednesday. Central Asia's biggest economy has sold more than 120 small and mid-sized firms as part of the privatisation programme, and has been preparing larger firms for sale.

Deputy Governor Yakiv Smoliy will take charge of Ukraine's Central Bank from Thursday until a new governor is found. The current Governor Valeria Gontareva, meanwhile, announced she will be taking a compulsory leave of absence, the statement said. Gontareva tendered her resignation a month ago with a view to leaving on Wednesday, but Ukraine’s president Petro Poroshenko has not yet accepted her resignation or nominated a candidate to replace her.

The European Bank for Reconstruction and Development announced the decision to continue the ongoing investment freeze in Russia, denying Moscow’s complaint that it had breached internal EBRD rules. The bank's President Suma Chakrabarti added the decision was "final and binding" and that there had been no discussion by the bank's decisionmakers on what it would require for the bank to restart investments in Russia.

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April / June 2020

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