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Emerging Market Credit Daily Roundup: 4 August, 2017

GS cosies up to Saudi Aramco – Doha Bank sells down UAE loan book – Doğuş places fresh lira bonds – Nigeria looks to China’s Nexim for US$550mn loan – SA MinFin allays fears of SOE privatisation – Invenergy places project bond to fund Uruguay wind farm – Venezuela default risk rises – RBI to create ETF for state asset stake sale - Guotai Junan Securities lines up fresh debt sale – Russian nickel prices looking bleak

Aug 4, 2017 // 11:52AM


Middle East and Turkey

Goldman Sachs has bought a piece of Saudi Aramco's US$10bn credit facility as it seeks a role in the listing of the oil company, Reuters reported. Goldman purchased a portion of the revolving credit facility Aramco signed with a number of banks in 2015. Two of the sources quoted by Reuters said Goldman purchased several million dollars in the secondary market from Australia and New Zealand Banking Group. The US based bank was not part of the original list of 27 lenders that participated in the transaction, which included other American, European, Asian and regional banks such as Citigroup, JPMorgan, HSBC and Bank of China.

Qatar's Doha Bank is said to be in the process of seeking buyers for some of its UAE-based loan assets, Reuters reported. If confirmed, this would be the first major move by a Qatari firm looking to cut exposure to the UAE.

Turkish conglomerate Doğuş Holding placed a TRY350mn 4-year bond in international markets this week. The EBRD was one of the main anchor investors on the transaction, picking up TRY100mn of the floating-rate notes.



Nigeria needs two more satellite to adequately equip NIGCOMSAT to discharge its duties, adding that private sector should intervene as government is making frantic effort to secure a loan of US$550mn from China NEXIM, the Minister of Communications, Barrister Adebayo Shittu explained.  During a meeting with stakeholders he also added that it was the position of government to diversify and partner with both local and international private sectors investors in the funding of the Ministry of Communications.

In a move widely criticised by analysts, Zimbabwe is looking to more than double its issuance of bond notes - the country's recently invented quasi-currency - to US$500mn, its Central Bank Governor said this week. The decision once again raises the spectre of hyperinflation, a perennial problem in Zimbabwe, and could strain the economy by exacerbating a real money shortage. Currently, banks have imposed strict limits on bank withdrawals, while corporates are struggling to finance imports.

South Africa's Finance Minister Malusi Gigaba warned that the country could slip into financial crisis if debts owed by state firms were not handled properly, however he maintained the position that government would not privatise the troubled South African Airways (SAA).  Gigaba also told a parliamentary committee that the government would not sell its stake in Telkom to fund bailouts of struggling state firms. He added that he was negotiating with SAA lenders to defer debt repayments of around ZAR7bn. The struggling airline has recorded a ZAR1.46bn loss in the first quarter of the latest financial year, missing its target by 79% and stoking fears of an impending bankruptcy. Earlier this week the National Treasury announced the appointment of Vuyani Jarana as new CEO of the airline, just one month after it had to step in to provide a ZAR2.2bn bailout for the company. The company is said to require an extra ZAR13bn in new capital over three years to maintain operations.



Invenergy’s 70 MW Campo Palomas wind project, located in the Salto Department of Uruguay, has issued investment-grade-rated green project bonds for approximately US$135.8mn in the U.S. Private Placement Market. The proceeds of the project bond issuance will be used to refinance the existing construction loan. The issuance is under the umbrella of the Inter-American Investment Corp. (IIC), while the deal was structured and arranged by DNB Markets Inc. and the IIC and was marketed by as the sole placement agent.

Analysts have once again raised concerns over the possibility of a Venezuelan bond default, with the US$725mn in principle and interest payments due this month alone. Credit default swaps spiked in early trading Friday, with the probability of default hitting 62%. Earlier this month, US President Donald Trump slapped fresh sanctions on Venezuela after Nicolas Maduro won a widely contested election that gave him the power to form a Constituent Assembly which, apart from being loyal to him, effectively supersedes the Parliament. Trump stopped short of applying sanctions to the country's oil sector, which would have severely damaged the country's economy given its strong dependence on the commodity. Analysts have grown more concerned that the election outcome could in fact expedite more violence and potentially, regime change, given the outcome did little to alter most of the domestic factors feeding the societal strife.

Venezuelan state-run oil producer PDVSA has cut crude sales to Citgo, its US refining unit, and increased supply to Rosneft following an agreement inked earlier this year that will see PDVSA catch-up on overdue deliveries to the Russian petroleum giant, according to a report from Reuters. Venezuela's Oil Minister Nelson Martinez told a forum in St Petersburg in June that Rosneft would receive 70,000 barrels per day (bpd) as payment for a US$1.5bn loan extended to PDVSA in 2016, and Russia announced a renegotiation of bilateral loans between the two countries shortly after. The increase in supply is thought to be linked to that debt refinancing.



The construction of two Russian-built pipelines into Europe, Nord Stream 2 and Turkstream, is going ahead despite fresh US sanctions being placed on the country and some state-run companies. Analysts suspect the new round of sanctions could still deter Western financiers from backing the projects, or Western contractors from bidding on different elements of the projects. Gazprom, the Russian oil giant leading both pipeline projects, has already warned investors that the new sanctions could create delays.

The Reserve Bank of India (RBI) is planning to create a Public Credit Registry that will function as a real-time database for all credit deal stakeholders to consolidate transaction and pricing information on loan transactions. Announcing the move this week, RBI Deputy Governor Viral Acharya said the registry will help consolidate and centralise information that can be used to deliver more transparency on pricing, and help financial system supervisors and regulators monitor and intervene early in order to restructure bad debt before it becomes too severe.

The State Bank of India, India's largest lender, it readying a INR20bn (approx. US$314mn) Basel III compliant bond, its board of directors confirmed this week. "The committee of directors for capital raising accorded its approval today to allot 20,000 AT1 Basel-III compliant non-convertible, perpetual, subordinated bonds in the nature of debentures... aggregating Rs 2,000 crore to various investors," State Bank of India (SBI) said in a regulatory filing. The bonds are expected to carry a 8.15% coupon and a 5-year call option.

India has set up a new exchange-traded fund to sell its stake in 22 state-run and private firms under a newly announced US$11.4bn asset sale programme, Finance Minister Arun Jaitley told reporters. The Finance Minister has budgeted to raise INR725bn Indian (US$11.39bn) through the programme in the fiscal year to end-March 2018. The fund will trade government shares in four state-run energy companies - ONGC Ltd., BPCL, IOC and Coal India. It will also include banking and finance firms like SBI, Bank of Baroda, Indian Bank, Rural Electrification Corp. Ltd., Power Finance Corp. Ltd. and Axis Bank.

More than half of all Chinese solar shipments in March this year went to India, according to a report published by Bloomberg. The Bloomberg New Energy Finance 3Q Frontier Power Market Outlook also shows that emerging markets now account for 60% of Chinese-made PV material shipments. The data was released at a time when the green bond market in India has begun to heat up, with Azure Power among others lining up new deals in the coming weeks.

Nawaz Sharif's disqualification as the Prime Minister of Pakistan could pose policy continuity risks which could weigh on the country's credit rating, Moody's suggested this week. "If heightened political uncertainty and strife among the various branches of government disrupt the administration's economic and fiscal agenda, macro-economic stability and the government's access to external finance could be impaired, weighing on Pakistan's credit profile," the rating agency said. Investors largely responded positively to the removal, with some suggesting it bolsters the view that Pakistan's institutional health remains strong and properly checked. PML-N, Sharif's former party, still holds a majority in parliament, which should relieve some policy continuity concerns.

Guotai Junan Securities, a Chinese financial services firm, announced it would this year sell the first tranche of corporate bonds worth up to CNY5.5bn. The dual-tranche notes will have coupon rates of 4.57% and 4.7% respectively.

Malaysia’s Public Bank Bhd (PBB) subsidiary Public Islamic Bank Bhd (PIBB) has issued the second tranche of a subordinated sukuk amounting to RM500mn. The tranche, with a tenure of 10 years, has a coupon rate of 4.65% per year, with maturity date on Aug 3, 2027. The first tranche was issued in 2014 and both are part of the Sukuk Murabahah Programme of up to RM5bn.


Russia, CIS & Europe

Russia’s nickel production would remain on a negative trend this year, following a contraction of 4.8% year-on-year in 2016, according to BMI. The firm cited ongoing operational challenges at Norilsk Nickel mines, which account for more than 80% of domestic output. “Nickel will be the only base metal to decrease in price in the coming years, in contrast to the improving prospects of copper, aluminium, lead, tin and zinc," the organisation said.

Romania's central bank kept its benchmark interest rate unchanged at 1.75% as predicted remaining cautious amid wage increase pressures and fiscal uncertainty. The central bank currently forecasts inflation at 1.6% this year, but expects strong local demand to push it to 3.1% in 2018.


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