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Emerging Market Credit Daily Roundup: 6 July, 2017

Refinancing risk in EMEA down but not for telcos, energy firms – Cityland Group secures US$143mn for new mall – Total and NIOC sign billion-dollar contracts – BDC, DBSA partner on infrastructure financing – Eskom inks new loan with China Development Bank – M-Akiba off to slow start – Cemig mulls Renova equity sale – Peru, Brazil courts move on former lawmakers – SEBI corporate bond cap gets strong support from CFOs

Jul 6, 2017 // 5:20PM


Global Themes

Refinancing risks in EMEA over the next four years has fallen, but lower-rated telecoms and energy firms still remain highly exposed according to Moody's. "Of $997 billion total debt outstanding, $481 billion or 48% is due to mature in the next four years from 2018-21, down from 53% last year (2017-20 maturities). Some 52% of debt outstanding is due to mature in more than four years' time, the highest proportion recorded since 2013," Moody's wrote in a recent report. "The amount of debt at risk issued by telecoms companies rose to $2.9 billion, or 20% of all Caa-Ca rated debt due in the next two years, from 6% ($1 billion) last year. That puts the telecoms sector just behind energy and oilfield-services companies, which account for the largest portion of debt at risk, with $3.1 billion or 21% of all Caa-Ca rated debt."


Middle East & Turkey

Cityland Group has secured a US$143mn loan from a number of regional lenders to help finance the construction of a new mall in Dubai. The Cityland Mall will consist of a 204,000m2 retail complex, and should be operational later this year. Emirates NBD and Burgan Bank led the transaction.

The owners of sukuk issued by Abu Dhabi-listed Dana Gas have gone to London's High Court of Justice to try to overturn an injunction, which it obtained in mid-June and which that blocks holders of the sukuk from enforcing claims against the company related to the US$700mn Islamic bond.  Dana Gas argues that because of changes in Islamic financial instruments and how they are interpreted, its sukuk are no longer sharia-compliant, and have become unlawful and unenforceable in the United Arab Emirates. Analysts argue the case could have ramifications across the Islamic finance industry, and a possible ruling against the creditors could undermine confidence in such instruments.

French energy company Total has signed a billion-dollar contact with the National Iranian Oil Company (NIOC) to help develop the world’s largest gas field, South Pars, Global Trade review reported. The agreement, with which the energy giant has committed to an initial investment of US$1bn, marks the country’s first deal with a European oil company in more than a decade. Total has worked on the South Pars oil field before, and was one of the biggest investors in Iran until international sanctions forced it to pull out of the country in 2006.



Eskom, South Africa’s state power utility company, signed a US$1.5bn loan agreement with China Development Bank on Thursday to finance the Medupi coal power plant, its acting chief executive said. "The conclusion of this second loan agreement continues to demonstrate financial market confidence in Eskom and South Africa notwithstanding the challenging market conditions," Eskom's Johnny Dladla told reporters at the signing ceremony.

The Botswana Development Corporation (BDC) has inked an agreement with the Development Bank of South Africa (DBSA) that will see the two development finance institutions help fund new infrastructure projects in Botswana. The MoU will see the two DFIs seek to identify new opportunities for co-financing and share expertise in niche infrastructure sectors.

Kenya's M-Akiba platform, which facilitates the sale of government securities over mobile phones, seems to be off to a slow start, with just KES17.7mn raised 6 days after the latest sale was launched. The government was hoping to place up to KES1bn in government securities through the platform, which was developed to increase financial inclusion and increase retail investor participation in the bond market. When the platform was tested in April, the Treasury managed to sell over KES1mn in placements within the first hour of launching.

China State Construction Engineering Corporation (CSCEC) has secured about US$200mn from Hass Petroleum and White Lotus Group to build a new state-of-the-art office development in Nairobi, Kenya. The Pinnacle will include two glass-façade towers, with the total cost of the project estimated at around KES20bn (approx. US$192mn).

The Nigerian Debt Management Office plans to raise up to NGN450bn naira (US$1.5bn) from the sale of new securities in a range of maturities in the third quarter this year, it said. The DMO plans to sell between NGN90-120bn in 5-year notes, and NGN135-165bn in 10 and 20-year notes between now and September this year. It plans to sell NGN135bn worth of bonds in its July 12 auction, the DMO announced.

The rand has pulled back from the lows around ZAR13.50 per US dollar yesterday after heavy selling pressure following the conclusion of the ANC policy conference, where members proposed nationalizing the Central Bank. "While the ownership of the central bank stands completely separate from the independence or mandate of the SARB, it comes at a time when markets are increasingly questioning the intent of many proposals around policy within South Africa," economists at Standard Bank explained in a recent note.

Gaz du Cameroun SA, a subsidiary of Victoria Oil & Gas, has signed an agreement with Cameroon state-backed oil firm Cameroon state oil firm Societe Nationale des Hydrocarbures and US oil company RSM Production Corp that will see the companies partner on the Logbaba gas field project.



Peruvian courts are waiting for a local judge to sign off on a warrant seeking the arrest of the country's former President Alejandro Toledo on corruption charges. Toledo, who governed Peru from 2001 to 2006 and is currently in the US, is a key figure in at least two ongoing investigations related to corruption and money laundering, and linked to a wider scandal involving graft payments from senior officials at embattled Brazilian construction giant Odebrecht.

Brazil's Companhia Energética de Minas Gerais (Cemig) has received an offer from Brookfield Energia Renovável S.A. for the capitalization of Renova, and acquisition of its equity interest in Renova Energy S.A. - which is currently held by Light Energia S.A. According to a regulatory disclosure, Cemig's shareholders are currently evaluating the non-binding offer."

Geddel Vieira Lima, a former Brazilian Cabinet Minister and close Temer ally was arrested Monday on claims he tried to siphon off funds from state-run bank and the country's largest mortgage lender, Caixa Economica Federal. Lima resigned last November after a number of influence-peddling allegations were launched against him. Analysts are at odds over whether the latest arrest in the wide-reaching Lava Jato graft probe will have an influence on a crucial labour reform vote due to take place July 11.



The French Development Agency has extended about €80mn in credit to help finance the development of two hydroelectric plants (HEP) in Himachal Pradesh, India. The 30MW Deothal Chanju hydro plant and the 78MW Chanju III hydroelectric plant are being developed by Himachal Pradesh Power Corporation Limited (HPPCL).

The growth in non-food credit in India rose to a two-month high of 6.71% year on year, slightly down from the 9.33% credit growth a year earlier, according to data released by the Reserve Bank of India. Overall, bank credit growth hit 6.03% year on year, down from 9.01% from the same period last year.

Investors and CFOs largely support new measures introduced in India which are aimed at restricting the number of different bond issuances for corporate entities to 12. Last week, the SEBI capped the maximum number of International Securities Identification Numbers (ISINs) that can be issued in a year to 17, with a maximum of 12 plain corporate transactions. The rules complement other recently introduced measures, including a new rule allowing corporate issuers to bundle together securities with the same tenor and covenants. The SEBI is looking to combat excessive heterogeneity in the corporate bond market, which currently sees corporates issuing a multitude of new notes rather than re-tapping existing issuances.

Hindustan Petroleum Corporation issued international bonds for US$500mn maturing in 2027 with a 4% coupon. Notes were sold at a price of 99.91% with an initial yield of 4.05%. Citigroup, DBS Bank, Mitsubishi UFJ Financial Group, SBICAP Securities and Standard Chartered Bank managed the deal.

Qinghai Provincial Investment Group (QPIG), a Chinese aluminum manufacturer, issued international bonds for US$300mn maturing in 2021 with a 6.4% coupon. Notes were sold at a price of 100% with an initial yield of 6.4%. DBS Bank acted as the sole bookrunner

The New Development Bank (NBD) is looking to raise fresh cash by issuing dollar- denominated bonds later this year, the agency’s president, K.V Kamath told reports at a briefing. Kamath said that he expected progress on securing an investment rating by an international rating agency this year, enabling the bank to tap global markets for dollar funding "towards the very end of the year."

Saturna Sdn Bhd, a Malaysia-based investment firm, and the private sector arm of the Islamic Development Bank launched a fund that will combine Islamic and sustainable investment principles. The new ICD Global Sustainable fund reflects a trend among Islamic financial firms which are embracing social responsible investing.

The Hong Kong branch of Shanghai Pudong Development Bank issued a dual-tranche bond worth US$750mn. The first US$400mn tranche matures in 2020 and carries a 3M LIBOR USD + 0.85% coupon.  While the second tranche worth US$350mn matures in 2022 and carries a 3M LIBOR USD + 0.95% coupon. Agricultural Bank of China, AMTD Asset Management Limited, Bank of Communications, Bank of America Merrill Lynch, Bank of China, CCB International, China Galaxy International Securities, China Minsheng Banking, Citigroup, Guotai Junan Securities, Haitong International securities, HSBC, Industrial Bank, Mitsubishi UFJ Financial Group, Shanghai Pudong Development Bank, SPDB International Holdings Limited, Standard Chartered Bank and Wells Fargo managed the deal.


Russia, CIS and Europe

Ukraine's acting Central Bank governor Yakiv Smoliy said that the country is likely to receive US$3bn in aid from the International Monetary Fund this year, instead of the US$4.5bn previously expected. The central bank also said that there’s uncertainty on Ukraine's ability to implement the programme it has agreed with the IMF under a US$17.5bn bailout launched in 2015.

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