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Emerging Market Credit Daily Roundup

Kuwait raises debt ceiling to KWD20bn - Kenya’s debut mobile M-Akiba KSH117.6mn bond sees 78.5% uptake – OAS demands Venezuela restore “full authority” to National Assembly – Panama plans to raise US1.25bn in cross-border bonds – Gazprom mulling over moving operations from London after Brexit – Russia and Belarus settle gas and oil price dispute

Apr 4, 2017 // 5:02PM

Middle East & Turkey

Saudi Arabian real estate developer Dar Al Arkan plans to launch a US dollar sukuk this week, the first international debt issuance by a Saudi corporate this year. The Islamic bond - expected to be of at least US$500mn - will be issued despite certain limits on the company's ability to raise debt, the sukuk prospectus showed. The revenue from this transaction will be used to refinance existent debt.

The Islamic Development Bank (IDB) set initial price guidance for a planned five-year US dollar-denominated sukuk in the low to mid 40bp over mid-swaps, according to Reuters. The triple A-rated Jeddah-based bank picked Boubyan Bank, Emirates NBD Capital, GIB Capital, Goldman Sachs International, HSBC, Maybank, Natixis, and Standard Chartered Bank as joint lead managers and bookrunners.

Kuwait will increase its public debt ceiling to KWD20bn (US$65.62bn) from KWD10bn and increase the maximum maturity of the bonds it can issue to 30 years from 10, Reuters reported. The government also plans to introduce sukuk as one of the new instruments at its disposal.

Saudi Aramco has extended the book building process for its debut local currency sukuk beyond the original deadline of April 3, leaving the books open for one additional day, Reuters reported. The oil giant started gathering orders for its first sukuk issuance – US$10bn programme - on March 27. The floating rate Islamic bond has a seven-year maturity and offers 25bp over the six-month Saudi Arabian Interbank Offered Rate (SAIBOR).

Africa

Kenyan citizens raised Sh117.6mn through the purchase of the first ever mobile phone-based M-Akiba bond. This represents a significant uptake of 78.5% of the Sh150mn that the National Treasury had targeted to raise between March 23, when the sale of the M-Akiba bond opened, and April 10 when it closes. Data from Treasury shows that as of mid-morning, there were 92,739 investors that had registered on the M-Akiba platform.

South Africa's Director General of the Treasury Lungisa Fuzile said "I am still here" when he was asked on Tuesday whether he had also resigned, following the recent dismissal of the finance minister Gordhan and his deputy. Fuzile was part of an investor roadshow abroad that was cut short on the orders of president Zuma.

Latin America

Chile's Central Bank cut its forecast for GDP growth in 2017 to a range of 1% to 2%, warning that a long strike at the world's biggest copper mine, Escondida, would likely shave 0.2% point from the year's growth. The previous estimated was between 1.5% to 2.5%.

The Organization of American States (OAS) approved a declaration stating that there is a “serious unconstitutional alteration of the democratic order” in Venezuela and demanding that the Nicolas Maduro government restore “the full authority” of the National Assembly, where the opposition holds a majority. The text was approved by 17 of the 21 states present in the meeting hall, with abstentions by only four nations: the Dominican Republic, Bahamas, Belize and El Salvador.

Changes recently proposed by Brazil’s Temer administration could improve legal framework for local credit, providing additional comfort to banks and ultimately supporting lending growth, according to Fitch Ratings. Pending updates to Brazil's 2005 bankruptcy law may have a special effect on this movement. Brazilian banks currently have hold around BRL10bn of repossessed assets as collateral for unpaid loans; the majority relate to real estate and the rest to automobiles. Despite the high repossessed assets' levels, banks are better positioned than 20 years ago because of the improved legal framework for these classes of guarantees.

Brazil logged a trade surplus of US$7.14bn in March – the biggest monthly gain recorded since records began in 1980 – as a weakened currency helped power agricultural exports. The record surplus comes despite a number of countries briefly banning Brazilian meat imports amid ongoing investigations into allegations of corruption between health inspectors and the operators of regional plants.

Venezuela's Central Bank is negotiating about US$500mn in financing with a New York-based investment fund by using PDVSA bonds as collateral to help meet almost US$3bn in debt payments coming due in April, Reuters reported Tuesday. Separately, Venezuela is also in talks to receive financial support from Russian state oil company Rosneft, which ought to help to comply with the heavy commitments of cash-strapped state oil company PDVSA in April.

Panama sovereign plans to raise US$1.25bn in the cross-border bonds, and may also seek funding to build a fourth bridge over the Panama Canal, finance minister Dulcidio de la Guardia announced, quoted in local media.

The Central Bank of the Dominican Republic (BCRD) raised its monetary policy rate by 25bp to 5.75%, noting the rise in February inflation, economic activity above the country's potential and an increase in credit to the private sector in excess of nominal growth. It is the first rate hike by the BCRD since a 50-point rate hike in November last year.

Asia

Consumer inflation in South Korea pushed higher in March as prices rose at their quickest since 2012, although a headline gauge of month-on-month inflation showed no change from February’s level. South Korea’s consumer price index rose 2.2% yy March, according to Statistics Korea, quoted by Reuters, up from 1.8% in February.

Fitch Ratings affirmed the "BBB-" credit rating of Philippines on March 29 with a positive outlook.

Russia, CIS and Europe

Credit Bank of Moscow raised US$500mn via a syndicated loan, the first transaction of that nature since March 2014 and its all-time largest syndicated deal. The bank put together a diversified base of lenders from 11 countries in Europe, North America and Asia. The proceeds from the one-year loan will be used for general corporate purposes.

Norilsk Nickel, Russian metal giant, has set the final yield guidance for its 6-year US dollar-denominated Eurobond at 4–4.125%.  The demand for the Eurobonds exceeded US $3.2bn, which allowed to cut the yield from 4.5% to about 4.25%.

The Ukrainian Central Bank cut the amount of foreign currency that businesses are required to sell to 50% of their foreign earnings from 65%, part of the promised currency liberalisation needed to finalize the pay-out of new IMF tranche.

Gazprom, Russia’s state-run gas giant, is considering moving its trading and marketing operations out of the UK after the country leaves the EU amid fears of losing preferential access to the European market as a result of a “hard” Brexit. The world’s largest natural gas producer is concerned that its ability to trade gas in the EU, by far its most important export market, could be curbed, sources told Bloomberg.

The presidents of Russia and Belarus said on Monday they had resolved all disputes over energy, signalling a reconciliation at a time when both leaders are grappling with street protests and the threat of new Western sanctions hangs over Minsk. According to Russian Deputy Prime Minister Arkady Dvorkovich, Russia will also renew oil supplies to Belarus of 24 million tonnes a year and Russia's Gazprom will give Belarus discounts on gas supplies in 2018 and 2019.

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