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Emerging Market Credit Daily Roundup

GIB granted approval to operate in Saudi – QIB inks QAR3.4bn sharia-compliant structured facility – Saudi Arabia wants to nationalise civil service in 3 years – Nigeria DMO bond auction disappoints – Zenith Bank readies benchmark bond – BancoEstado hits the Aussie market – inflation on the rise in Argentina – Russian Railways begins bookbuilding for local bond

May 11, 2017 // 4:54PM

 

Global Themes

In March, about US$9.1bn of sukuk was issued globally, which brought the year to date issuance volume to US$22.2bn at the end of Q1 according to RAM Ratings. Malaysia dominated the deal pipeline, with the country's entities accounting for 38.5% of gobal issuance volumes, followed by Indonesia (24.7%) and Qatar (9.9%).

 

Middle East & Turkey

Gulf International Bank (GIB) was granted approval by Saudi Arabian authorities to become a local bank in the Kingdom. Currently, GIB operates its banking activities in the Kingdom of Saudi Arabia through its regional branches in Riyadh, Dhahran and Jeddah. This comes after Citi was given an investment bank license 13 years after leaving the Arab nation.

Saudi Arabia reported a first quarter budget deficit of SAR26.2bn (US$7bn) as oil revenue rise, the Ministry of Finance said. Revenue for the three months to March rose 72% from a year earlier to SAR144.1bn, while expenses fell 2.7%. The Kingdom is shifting to quarterly statements on the economy -- having typically reported only annually – to promote transparency.

Qatar Islamic Bank (QIB) signed a QAR3.4bn (US$925 million) structured Shari'ah-compliant financing facility with Gulf Drilling International Limited QSC (GDI). This new facility will be used to re-organise the company’s debt and further enhance its operational and financial performance. The company is also working on a fresh sukuk. Citibank, Emirates NBD Capital Bank, HSBC, Noor Bank, QInvest and Standard Chartered Bank have been mandated to lead the sale, according to a note from the country’s stock exchange.

National Bank of Kuwait (NBK) has mandated six banks to arrange a series of fixed income investor meetings ahead of a potential five-year senior unsecured dollar bond. Citi, HSBC, JPMorgan and NBK Capital are the coordinators and are joined by First Abu Dhabi Bank and Standard Chartered as joint lead managers. Meetings will be held in the Middle East, Europe and the United States starting on May 15. The 144 A, Regulation S transaction would potentially be of benchmark size.

The Saudi Ministry of Civil Service has asked all ministries and government departments to get rid of all expatriate workers within three years, according to deputy minister Abdullah Al-Melfi. “There will be no expatriate workers in the government after 2020,” he was quoted as saying in the Saudi Gazette. The Gulf state has been looking at ways of boosting employment among nationals.

 

Africa

Nigeria sold fewer bonds at auction than expected as the yields on offer failed to attract foreign investors. The Debt Management Office (DMO) raised NGN100bn of the NGN140bn it had targeted. According to Reuters, traders said subscriptions were low because yields were priced lower than the inflation rate, noting the debt office had pushed to sell more of its 20-year notes.

Zenith Bank says intends to raise US$500mn via medium term note, which will be part of the second tranche of its medium -term programme. In 2014, the Nigerian based lender established US$1bn global medium term note had raised US$500mn under the first tranche of notes issued

The African Development Bank has approved a US$226.5mn loan to Namibia. The loan proceeds will be put towards the Namibia Economic Governance and Competitiveness Support Programme (EGCSP), which will be used to support the country's structural reform efforts.

Zambia's energy regulator approved the removal of key subsidies and a 75% increase in the price of electricity for retail customers, the Energy Regulation Board Chairman confirmed this week. The 50% price hike will be implemented as early as next week. Earlier this year Zambia's president reversed the sharp increase in electricity tariffs because it would end up hurting the country's poor.

Zambia will conclude a deal with the IMF for as much as US$1.6bn by the end of June, Finance Minister Felix Mutati said. The country has been talking about getting IMF aid since 2014 but an agreement has been delayed by two presidential elections, which made the required reforms politically unappealing.

Kenya’s biggest bank by assets expects the government to remove a cap on commercial interest rates in the second half of this year, as the measures failed to spur lending and put revenue under pressure, Bloomberg reported. Lenders are facing a revenue drop of as much as 25%, and are being forced to reduce costs by closing branches and cutting jobs to offset the decline, according to Barclays Bank of Kenya Ltd. CEO Jeremy Awori.

A Zimbabwean cabinet minister has warned South Africa against copying Harare’s disastrous land reform agenda. In the 2000s Zimbabwe collapsed into economic chaos after President Robert Mugabe implemented a land reform programme that led to the seizure of white-owned commercial farms and the eviction of 5,000 mostly white farmers and 150,000 black farm labourers. Now Walter Mzembi, Zimbabwe’s minister of tourism, warned its South African counterparts, telling the FT: “Do not carbon copy our revolution, evolve your own model. Land was the bedrock of our struggle. It is a less emotive issue [in South Africa] than in Zimbabwe.”

 

Americas

Chilean state-owned lender BancoEstado sold AUS100mn (approx. US$73.8mn) in new notes in international markets this week. The 10-year senior unsecured notes were rated Aa3 by Moody's.

Argentina's Central Bank has renewed its FX purchasing operations and is buying US dollars in the local foreign exchange market in order to taper the peso's strengthening. The peso has already strengthened about 2.1% this year. The Central Bank has bought about US$500mn on the spot market in April and US$600mn in March.

Argentina’s inflation rose 2.6% more than expected by analysts, which expected an increase of 2%. According to el INDEC consumer prices have risen a total of 27.5% over the past 12 months.

Brazil's JBS could delay its US IPO due to lukewarm investor feedback, according to multiple sources. The meet producer is reportedly concerned about the impact of a government probe into alleged bribery of health officials linked to a tainted meat scandal, which also sent the company's bonds tumbling. Analysts expect the company could raise as much as US$1bn through the listing.

Colombia's Biotoscana is looking to make its listing debut in Brazil, according to a regulatory filing. The pharmaceutical company plans to offer new stock offering known as Brazilian Depository Receipts or BDRs.

 

Asia

The Asian Development Bank (ADB) has signed a US$500mn loan agreement and a guarantee agreement with the government of Azerbaijan for the Shah Deniz 2 gas project. This marks the second hefty loan the ADB provided to Baku, after it added US$250mn to the funding package of US$1bn for the same project in 2015.

India's Minister of Road Transport and Highways Nitin Gadkari is in London this week promoting international investment in the country's infrastructure. Gadkari is also looking to promote Masala bonds to global EM investors, and is on hand this morning at the London Stock Exchange to list the National Highways Authority of India's (NHAI) inaugural Masala bond.

Norilsk Nickel Africa will move forward with a lawsuit against Botswana over a failed US$271mn deal to sell a 50% stake in its Nkomati nickel mine despite the government still looking to raise the necessary funding. The mine sale was concluded late last year after Botswana gave multiple assurances it could afford the stake via BCL Group, the state-backed buyer of the site.

China's Shimao Property and Longfor Properties announced it had obtained regulatory approval to issue medium-term notes for CNY8bn in the interbank market. This refinancing channel is being tapped more frequently by local developers that seek to avoid government restrictions aimed at cooling the property market.

The People's Bank of China (PBOC) is looking to inject more liquidity into the banking system this Friday via medium-term lending facility (MLF), Reuters reported citing unnamed sources. The PBOC rolled over CNY230bn in 6-month MLF funding, and CNY179.5bn in 6-month MLF loans are due to mature next week.

United Bank of India is mulling whether or not to raise up to INR10bn through a combination of debt and equity offerings, adding to an already crowded Indian FI pipeline. The bank is considering a publicly issuing new stock or a rights issue.

The Philippines Central Bank left its key overnight borrowing rate steady at 3% as expected, with inflation seen within its target for this year and next despite strong economic performance. The Philippine central bank has not tinkered with interest rates since it raised the benchmark rate by 25 bps in September 2014.

 

Russia, CIS and Europe

Russian Railways has begun bookbuilding for a proposed 8.5% 20-year RUB15bn local currency bond, as part of its issuance programme initiated in November 2016. The preliminary date of placement is set for 18 May, with VTB Capital acting as arranger and manager of the issue.

Bank of Georgia announced that it had mandated JP Morgan and Renaissance Capital to arrange investor meetings ahead of a potential lari-denominated Eurobond issue.

EU ministers today approved measures that will allow Ukrainian citizens to travel to the EU for 90 days in any 180-day period without a visa. The EU’s move came after Kiev pushed through reforms in areas such as migration, public order and security, external relations and fundamental rights, Carmelo Abela, Malta’s minister for home affairs and national security announced in a statement.

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