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Emerging Market Credit Daily Roundup

Dubai secures US$3bn for airport upgrades – QIIB lines up sukuk – Egypt readies Eurobond sale – Finansbank hits the bond market – Nigeria plans US$100mn in new forwards sale – Ivory Coast credit affected by escalation of violence – BNDES to help finance solar project in Minas Gerais – Argentina authorises US$20bn in future debt sales – China reveals whopping US$124bn in funding linked to “One Belt, One Road” – Indian credit to CAPEX-heavy industries suffering – Russian banks thwart cyber-attack -VTB posts huge profit increase

May 15, 2017 // 4:20PM

 

Middle East & Turkey

The Dubai government has secured a US$3bn longer-term loan to finance the expansion of its airport. The infrastructure project is just one of three large initiatives being developed by the Dubai government including the World Expo 202 and the Dubai metro system. The funding programme includes a US$1.63bn 7-year conventional loan and a US$1.48bn equivalent 7-year ijara facility denominated in dirham. Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Bank of China, Citibank, Dubai Islamic Bank, First Abu Dhabi Bank, HSBC, Industrial and Commercial Bank of China, Intesa Sanpaolo, JPMorgan, Noor Bank and Standard Chartered were mandated lead arrangers and bookrunners on the transaction, with HSBC acting as financial adviser.

Qatar International Islamic Bank (QIIB), Qatar's third largest listed Islamic bank by assets, has appointed banks ahead of a potential US dollar-denominated sukuk, Reuters reported.  However, the lender’s Islamic bond is not likely to occur before Ramadan that this year begins at the end of May. The planned bond sale would follow QIIB's decision to renew a sukuk issuance programme of up to US$2bn.

Saudi Arabia and Russia have allegedly reached an agreement to continue with OPEC-led output curbs – a deal that seems to have given a boost to the oil price, which had been dropping most of last week. In a joint statement, Saudi Energy Minister Khalid Al Falih and his Russian counterpart Alexander Novak announced the next round of cuts, which will be on the same terms as the first curbs deal, to cut almost 1.8m barrels a day. Oil prices rallied in European trading on Monday, rising to the highest level in around two weeks; The U.S. West Texas Intermediate crude June contract added 97 cents, or around 2%, to $48.81 a barrel, while Brent oil rose 99 cents to $51.82 a barrel.

Egypt cancelled the sale of its seven-year treasury bonds at an auction on Monday. The average yields on the three-year bonds meanwhile rose to 17.360% 17.229% at the last similar auction. The central bank hasn’t explained why the auction was cancelled.

Egypt will issue a Eurobond of between US$1.5bn to US$2bn within the next week, Finance Minister Amr El Garhy told Reuters. This will be the second time the sovereign would issue this years after having sold US$4bn of Eurobonds across three tranches in January, raising twice as much as targeted and at lower yields than expected.

Turkish clothing retailer Mavi Giyim is planning to go public in a move that will see it float a 50% stake in the company. The company, which was founded in Istanbul in 1991, has a presence in over 35 countries. The company said it could look to sell an additional 15% stake if the sale goes well.

Turkey's Finansbank placed an upsized US$750mn trade in the international markets late Friday. The notes maturing 2022 were priced at 99.671% to yield 4.95%. Citigroup, HSBC, ING Wholesale Banking London, JP Morgan, Qatar National Bank, and Standard Chartered Bank managed the sale.

Turkish lender Is Bankasi signed a syndicated loan agreement for US$296mn and EUR989.5mn with a maturity of 367 days. The all-in price for the highest participation level of each tranche is Libor+1.45% and Euribor+1.35% respectively. The proceeds will be used for trade finance purpose.

The Board of Executive Directors of the Islamic Development Bank (ISDB) approved US$453mn worth of infrastructure projects for five member states. The BED also approved three special assistance projects worth US$580,000 for Bosnia and Herzegovina, Kenya and Rwanda.

 

Africa

Kenya among other African countries should stay out of the Eurobond market until headwinds ease, according to Head of Quantum Global Research Professor Mthuli Ncube. Speaking at the launch of the Africa Investment Index 2016 in Nairobi, Ncube said Kenya should hold off returning to the Eurobond market to refinance existing liabilities until after the elections in August this year, while others should hold off due to foreign exchange risk.

Nigeria's Central Bank has plans to sell US$100mn on Monday at a special wholesale spot and forwards auction in its attempt to improve dollar liquidity in the foreign exchange market and narrow the spread between official and black market rates.

South Africa's Standard Bank has agreed a US$120mn debt package with the Zimbabwe Power Company (ZPC), which has been grappling with power and liquidity shortages. The funds will be used for the rehabilitation of existing power infrastructure at Kariba South Hydro Power Station and Hwange Thermal Power Station, the bank said in a statement.

Ivory Coast's dollar-denominated bonds fell on Monday as two of the country's biggest cities were hit by gunfire and fighting, with the military pressing to crush a nationwide army mutiny over bonuses. Data from Tradeweb showed that bonds maturing in 2024 fell 0.8 cent to a three-week low, while the 2028 issue lost 1.2 cent to hit its lowest level in 10 days. Ivorian soldiers are revolting over delayed bonus payments promised by the government after a mutiny in January, but not fully paid amid collapsing cocoa prices.

 

Americas

Brazil state lender BNDES will help finance a 150 MW solar project being developed by EDF and Canadian Solar in the state of Minas Gerais. The Brazilian Development Bank has approved a BRL529mn (US$168.4mn) financing package for the construction of the project, which is scheduled to come online in August 2017. The project, which was selected in the solar energy auction held by the Brazilian government in 2015, once completed is expected to deliver power to the local grid at BRL298.58 ($95.1)/MWh.

Puerto Rico’s Government Development Bank, once the primary fiscal agent for the US territory, reached a liquidation deal with its creditors, Reuters reported. The deal would be executed through a so-called Title VI proceeding under PROMESA, the federal Puerto Rico rescue law, avoiding a protracted Title III bankruptcy. It would split GDB's assets into two separate entities, one for bondholders and municipal depositors, and one for all other depositors.

Argentina has authorized the sale of US$20bn in sovereign bonds to be issued under U.S. and British law, according to a decree published in the government gazette on Monday and quoted by Reuters. The bond issuance, to take place under opportune market conditions, is part of the government's 2017 financial program. To get the most favourable terms for Argentina, it is necessary to extend the legal jurisdiction of the transaction to state and federal courts in New York City and London, the decree said.

 

Asia

Chinese President Xi Jinping unveiled a US$124bn funding package for the country's new Silk Road plan, formally known as the "One Belt, One Road" initiative. The funding package includes an extra CNY100bn (approx. US$14.5bn) for the development of new road and rail infrastructure linking Asia with new routes in Europe, and CNY60bn for aid to a range of countries linked to the ambitious infrastructure programme.

People’s Bank of China has set up its own committee on financial technology, the Bank announced Monday. The purpose of the committee will be to strengthen fintech research, planning, and coordination within the industry, according to a statemen on the Bank's website.

Hong Kong’s GDP growth has picked up considerable in Q1 2017, marking its best year-on-year performance since 2011. Quarterly GDP rose by 0.7% in the three months to March, far exceeding the 0.2% forecast by Bloomberg, and pushing year on year growth to 4.3%. Growth was primarily driven by improvements in the global economy and strengthening domestic demand, according to the country’s Ministry of Economy.

Hong Kong-based life insurer AIA Group priced a US$500mn trade late Friday. The notes maturing 2047 priced at par to yield 4.47%. ANZ, Citigroup, Deutsche Bank, and HSBC managed the sale.

Bank of East Asia, the third largest bank in Hong Kong, placed a US$500mn bond in the international markets. The notes maturing 2022 were priced at par to yield 5YMS+3.682%. Citigroup, Goldman Sachs, HSBC, OCBC, and SMBC Nikko Capital led the sale.

Hong Kong-based property developer Cheung Kong Property Holdings priced a US$1.5bn bond in the international markets this week. The notes were priced at par to yield 4.6%. Deutsche Bank, HSBC, and UBS managed the sale.

Electricity distributor Huachen Energy planced fresh benchmark-sized notes in the international markets. The US$500mn notes maturing 2020 were priced at par to yield 6.625%. BNP Paribas, CITIC Securities International, China Minsheng Banking, and Essence Securities managed the sale.

The Bursa Malaysia has signed a memorandum of understanding with the Shanghai Stock this week. The MoU will see the two exchanges double down on improving accessibility among market participants in both Malaysia and China in one another's equity markets.

Thai banks announced lower loan rates, the same day the central bank said it hoped the pace of lending in 2017 will be significantly higher than it was in the first quarter. Market leader Bangkok Bank, state-run Krung Thai Bank and number four Kasikornbank said they would cut their retail lending rates by 50bp while third-ranked Siam Commercial Bank said it would cut all loan rates by 25bp.

Thai commercial banks' non-performing loan levels are expected to peak later this year, according to a senior Central Bank official. Banks' NPLs rose to 2.94% of total lending in Q1 2017, up from 2.83% in the fourth quarter of 2016. At the same time, lending increased 2.8% in March according to fresh figures, above the 2% loan growth seen in 2016.

Credit availability to India's debt-heavy sectors including the power, telecoms and mining sectors has been declining steadily over the past year, according to industry body Assocham. India's mining sector saw lending drop 11.5% to INR345bn in March this year, down from INR390bn the same month the previous year. Bank credit to India’s telecom sector dropped 6.8% year on year to INR851bn in March 2017.

 

Russia, CIS and Europe

Russia's Central Bank said this weekend that the country's lenders have managed to thwart a massive cyberattack that has hit tens of thousands of computers and dozens of companies globally. Local media also reported that state-owned Russian Railways also successfully defended itself from a cyber-attack.

Ukrainian President Petro Poroshenko said the country is currently considering a number of candidates to replace Valeria Gontareva as Central Bank governor, but refused to name any names. Gontareva resigned in April as the bank continues to deal with headwinds facing the country's economy and banking sector.

A consortium led by Russian Direct Investment Fund and including Chinese, Middle East and other investors said on Saturday it would invest over RUB90bn (US$1.6bn) in a real estate development project in Moscow. The consortium comprises Russia's sovereign wealth fund RDIF along with the Russia-China Investment Fund, a joint venture between RDIF and China Investment Corporation, Russia-based international investment and industrial group Vi Holding as well as unnamed Middle East investment funds, RDIF said.

CEO of Russia’s top gas producer Gazprom Aleksei Miller and Chairman of China National Petroleum Corporation (CNPC) Wang Yilin signed papers on expansion of cooperation between the countries in the areas of underground gas storage, power industry and road infrastructure at a work meeting in Beijing on Monday. The agreement could also see Gazprom take lead in researching and developing plans of a project to build underground gas storage facilities in China.

VTB, Russia’s second-largest state bank, posted a first-quarter net profit of RUB27.6bn (US$488mn) on Monday, up from a mere RUB0.6bn for the same period in 2016. VTB is aiming to double its 2016 net profit to about RUB100bn this year. Net interest income went up 15% to RUB113bn, while net fee and commission income went up 13.2% to RUB19.7bn. Costs increased to RUB61.6bn, rising 1.7%, while provision charges grew 13% to RUB45.9bn.

Ratings agency Moody's Investors Service revised the outlook on Poland's A2 issuer rating on Friday from negative to stable, citing reduced risks of loose fiscal policy and a lack of material deterioration in the investment climate under the country's right-wing government. "The primary driver ... is Moody's expectation that the downside risks to the fiscal stance that led to the negative outlook one year ago are abating," the agency said, affirming the issuer rating at A2.

Serbia's Central Bank kept its key policy rate at 4%, as expected, saying its May inflation report shows that inflation is projected to remain within the Central Bank's tolerance band in the next two years. The National Bank of Serbia (NBS), which has maintained its rate since cutting it to the current level in July 2016, added its policy decision was also guided by the effect of past monetary easing.

 

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January / March 2020

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