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Emerging Market Credit Daily Roundup

Saudi Electricity Co. hits the loan market – Turkey’s balance of payments, current account deficit improve – Kenya CMA to bring mobile bonds to the corporate world – Nigeria plans fresh debt sale – Namibia gets AfDB loan – Unifin, Capex price Eurobonds – Pacer Logistica hits the local market – China sweetens on US, kicks of fresh One Belt Road funding – Investors likely to take haircuts on debt in India: Moody’s – Rosneft begins bookbuilding ahead of RUB placement

May 12, 2017 // 5:14PM

 

Middle East & Turkey

Saudi Electricity Company (SEC) is said to be in the market for a US$1bn syndicated loan, according to Reuters. The company has send out a request for proposals for a 5-year bullet loan after considering the bond market. Some of the proceeds from the loan will likely be used to refinance a 5-year US$1.5bn loan secured from the Industrial and Commercial Bank of China last year.

Loan growth in Turkey surged 21% to TRY1.83tn (approx. US$510.37bn) in March, according to regulatory filings, the strongest growth seen in nearly seven years. Analysts suggest the growth was bolstered by increases in SME loans guaranteed by the state-run Credit Guarantee Fund.

The Central Bank of Turkey released balance of payment figures for March 2017, which was the trade deficit narrow to US$2.844bn from US$3.637bn seen during the same period the year before. The current account deficit stood at US$3.05bn in March 2017, down from US$3.72bn during the same period in 2016.

 

Africa

Kenya's Capital Markets Authority said it is currently developing a framework that would allow companies to raise fresh capital but selling bonds that can be subscribed to on a mobile platform. The CMA has previously worked with the Treasury on M-Akiba, a platform that allows retail investors to bid for bond allocations using mobile phones. The Treasury sold KES150mn in a trial of the platform in March, and plans to sell a far more substantial amount in June this year.

Kenya borrowed US$1bn through a syndicated loan from commercial banks, US$200mn more than was expected, Reuters reported. The US$1bn loan was split into a 2-year tranche and a 3-year tranche. The loan was arranged by Citigroup, Rand Merchant Bank, Standard Bank and Standard Chartered Bank. The East African nation said in March it was raising a total of US$1.55bn in syndicated loans, with US$800mn coming from commercial banks and the rest from development finance banks.

Nigeria plans to sell NGN110bn naira (US$350mn) of treasury bills on May 17, the central bank announced. The bank plans to sell NGN32.43bn naira of three-month debt, NGN22.82bn naira of six-month bills and NGN55.68bn naira of one-year notes. The East African nation issues treasury bills twice a month to finance its budget deficit, help lenders manage liquidity and control inflation. The bank has increased the frequency of treasury bill sales recently to soak up excess liquidity, a move to curb pressure on the local naira currency.

Nigerian parliament has finally passed the 2017 budged, a long-awaited move that may finally allow the government to go ahead with its reform agenda. The lower and upper parliamentary chambers passed the budget, set at NIN7.44tn (US$24.4bn), on Thursday, with both chambers had agreeing to a higher volume than the original proposal of NIN7.298tn. The budget assumes an oil price of $44.5 a barrel, foreign borrowing of NIN175.9bn and domestic borrowing of NIN1.48tn, lawmakers said.

The launch of Nigeria's debut green bond is still being held up by delays to the release of the 2017 budget. The projects identified for the proceeds of the green bond are all tied to appropriations contained within the bill, which led to significant delays. The Ministry of Environment has not confirmed the official date of the launch, which was originally earmarked for April, but with the NGN7.1tn budget now passed analysts expect the country’s green bond plans to move forward with haste.

Moody's kept its outlook on the Nigerian banking system stable this week, and suggested the severe currency shortages were likely to ease as the country's oil and gas revenues stabilise. The rating agency forecast GDP growth at 2.5% in 2017 and 4% in 2018, an improvement on the 1.5% contraction seen last year. It also said capital buffers of the country's largest lenders would likely improve, but non-performing loans are likely to increase marginally.

Namibia has secured a NAD10bn (approx. US$750mn) loan from the African Development Bank to help finance the budget deficit and further infrastructure development in the country. The country's budget deficit is expected to narrow to 3.6% of GDP in the upcoming fiscal year, nearly half of what it was the previous year.

Zimbabwe this week secured a US$1.7bn loan from the African Export-Import Bank to help the country clear its arrears with a number of lenders. The country owes about US$1.1bn in interest and penalties along with US$601mn to the African Development Bank.

South Sudan's largest bank is shutting more branches as hyperinflation and a shortage of dollars eat into the group's profits, Reuters reported. The Kenya-based KCB Group Plc, East Africa's biggest bank by assets, will temporarily close five branches, leaving ten operational.

 

Americas

Latin American currencies posted impressive gains this week off the back of stronger commodity prices and a weaker US dollar. The Mexican peso rose 0.9% against the greenback while the Colombian peso and the Brazilian real firmed 0.6% and 0.7%, respectively.

Mexico's Unifin Financiera launched a US$450mn bond in the international markets this week. The notes maturing 2025 were priced at 99.258% to yield 7.125%. Barclays, Citigroup, and Credit Suisse managed the sale.

Brazilian logistics firm Pacer Logística hit the local market to price a BRL24mn debenture due 2024. Sale of the notes, which yield 8.5% of the DI, was led by Itau.

Brazilian wind farm developer and energy firm Potami Energia S.A. hit the market ot place a BRL42.4mn debenture in the local markets this week. The notes maturing 2026 were sold at a spread of 7.375% above the DI. Itau led the sale with Banco ABC joining as coordinator.

Peru cut its benchmark monetary policy rate by 25bp to 4% this week, a move aimed at reviving economic growth after heavy flooding weighed on output and business efficiency. The Central Bank also revised down 2017 growth forecasts to 2.5-3.2%, down from 3-3.5% in the wake of the flooding.

Capex, an Argentinean energy company, issued international bonds for US$300mn maturing in 2024 with a 6.875% coupon. Bonds were sold at a par with a yield of 6.875%. Banco Bilbao (BBVA), Deutsche Bank, Itau Unibanco Holdings, and JP Morgan managed the deal.

 

Asia

China announced a series of measures aimed at opening up the country's markets to the US. The measures include allowing US-based credit rating agencies to set up show in China, and a pledge to recommence importing US beef.

China’s total social financing (TSF), a measure of credit and liquidity in the economy, declined to CHY1.39tn (US$201.4bn) in April from CHY2.12tn in March, Reuters reported quoting data from the PBoC showed on Friday. TSF includes off-balance sheet forms of financing that exist outside the conventional bank lending system, such as initial public offerings, loans from trust companies and bond sales, as well as giving insight into the country’s massive shadow banking sector.

China kicked off its ambitious Belt and Road initiative by launching a state-financed US$40bn Silk Road Fund. It is also going to encourage its “policy” lenders - the China Development Bank Corp., Export-Import Bank of China and Agricultural Development Bank of China, along with the multilateral bank Asian Infrastructure Investment Bank – to invest in a range of projects across Eurasia and deepen economic ties with its neighbours. The group of banks was responsible for around US$39bn worth of cross-border investments in 2016, up 50% from two years ago, according to Bloomberg.

The National Highways Authority of India’s launched the first Masala bond in London this week. The INR130bn (approx. US$467mn) bond listing is part of the Indian government's bid to raise fresh capital for infrastructure development.

India's efforts to take care of dodgy loans have won praise from Fitch Ratings this week, but the rating agency suggested the resolution of bad debt will likely require investors and lenders to take significant haircuts. "Recent regulatory actions in India suggest the authorities are making a more concerted push to tackle banks' bad loan problems. "In the short-term, this is likely to create provisioning costs that will mean continued pressure on bank profits," Fitch said. "The resolution of non-performing loans is likely to require significant haircuts if the re-priced loans are to attract attention from private investors and asset- reconstruction companies."

Malaysia left its benchmark interest rate unchanged at 3%, with consumer prices expected to rise at moderate pace and the stronger ringgit helping stem capital outflows, Bank Negara Malaysia said in a statement in Kuala Lumpur on Friday.

 

Russia, CIS and Europe

Serbia's central bank left its benchmark interest rate at 4% the 10th consecutive month, opting to watch global monetary policy trends and keep a lid on rising domestic inflation.

The International Bank of Azerbaijan, Azerbaijan's biggest lender, said it needed to restructure in excess of US$3bn worth of its debt, most owed to foreign creditors, to tackle bad loans left over from the slump in oil prices. The state-controlled bank's dollar-denominated bond tumbled to its lowest level in over a year as investors reacted to an announcement. The problems at the bank show how Azerbaijan, an energy exporter, is still wrestling with lingering problems left over from a prolonged slump in oil prices.

Russia’s oil giant Rosneft began bookbuilding for its a new RUB15bn note, part of the company’s RUB1tn bond programme. The bids were collected in one hour span, a noon Moscow time. The technical placement is set for May 18, with Gazprombank acting as organizer, and Russian Regional Development bank as the underwriter.

 

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January / March 2020

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