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The Daily Roundup

Saudi Arabia to follow landmark bond with sukuk – Turkey current account deficit widens as CB moves to stem currency slide – flydubai in club loan talks – Ghana names new MinFin – Nigeria aims to harmonise official, black market exchange rates – Rosstat confirms CPI increase – Indonesia announces new rules for primary dealers

Jan 11, 2017 // 6:20PM

MIDDLE EAST & TURKEY

Saudi Arabia plans to follow its record-breaking debut on global debt markets with a sukuk issuance, which may arrive as early as February. The sharia-compliant Islamic bond is part of the strategy to finance the Kingdom’s budget deficit and continue to diversify the economy away from oil.

Saudi Arabia suggested it will reduce crude sales to China and southern Asian nations, apart from Japan and South Korea, as it continues to lower production as part of the OPEC production cuts agreement.

Turkey's Central Bank intervened to support a slumping lira by reducing the foreign exchange reserve requirement ratio by 50 basis points, allowing it to inject up to US$1.5bn to prop the currency up. Central Bank officials said it could introduce further measures to help stabilise the currency, which recently surpassed the TRY4 per euro mark.

Turkey’s current account deficit grew by US$590mn in November, reaching US$2.27bn and adding more pressure on the ailing Middle Eastern economy.

The Government of Oman has approached several banks over a possible US$1bn bond, according to reports from Reuters. Oman raised US$2.5bn in 5 and 10-year notes in June last year, a US$500mn triple-tranche privately placed sukuk that same month, and US$1.5bn in a re-tap. In December, the government said it would borrow between US$1.5bn and US$2bn from international capital markets in 2017.

The upstream unit of Oman Oil is said to have revived talks with SMBC and a range of other lenders over a long-term facility ranging in the US$1bn area.

Dubai is currently finalising up to US$3bn in conventional and Islamic loans with regional and international lenders, the proceeds of which will go towards the expansion of the Al Maktoum International Airport and the construction of a new convention centre used for the upcoming Expo 2020.

Dubai-owned flydubai is in the market for a club loan of an unspecified amount to help finance future infrastructure spending, the company said this week. Regional lenders Emirates NBD, Noor Bank and Union National Bank are involved in the preliminary discussions.

 

AFRICA

Kenyan opposition leaders gathered in the capital on Wednesday to discuss the formation of an alliance to run against President Uhuru Kenyatta in this year’s elections and a contentious new electoral law.

Ghana's new President Nana Akufo-Addo this week named the co-founder of investment bank Databank, Ken Ofori-Atta, as the country’s new Finance Minister, a move markets seem to be digesting well. The government will look to double down on measures aimed at kick-starting growth.

Ivory Coast's President Alassane Ouattara named Amadou Gon Coulibaly, a close political ally and previously secretary general, as the country's new Prime Minister. The appointment comes just days after the government stemmed a mutiny led by disgruntled soldiers.

Nigeria-based multinational lender Africa Financial Corporation (AFC) is to hit the market with its inaugural sukuk in February. Last year the AFC issued its debut US$750mn conventional bond.

Nigeria's Bureau de Change operators set their first ever reference exchange rate for the naira at NGN399 to the US dollar on Tuesday after retail operators and officials from the government and the country's Central Bank met to discuss how to close the gap between the official and black market exchange rate. The move is seen as a critical step in the government's bid to liberalise the exchange rate and rescue the country from economic ruin after a weakened economy forced the gap between official and black market rates to widen to as much as NGN100 per dollar. The naira lost a third of its value in 2016 after the government let the exchange rate partially float.

The Chinese government is said to be withholding a NGN20bn loan concession originally promised to Nigeria, part of a US$60bn pledge for African countries, due to a loss of confidence in the country's economy, according to local newspaper reports. The move has raised fresh concerns over the government's ability to borrow up to US$30bn needed for infrastructure development in the country.

 

AMERICAS

Belize’s trustee committee have agreed to hold talks with the government for its third debt restructuring in a decade. Belize has admitted that the super bond issued in 2013 for $US530mn and due in 2038 is unsustainable.

Brazil's federal government is less likely to authorize cash-strapped states to raise fresh debt after the Supreme Court forced the Treasury to use its own money to honour loans not paid by the Rio de Janeiro state, Reuters reported, quoting sources on Tuesday. As the guarantor of nearly all loans contracted by states, the Treasury has withheld states' own tax revenues to honour missed payments. However, last week's court order prevents the government from withholding those tax revenues, meaning it has to use its own resources to honour unpaid debts.

Argentina’s government struck a deal with energy companies with the intention of revamping flagging production of the world’s second largest shale reserves, located in Patagonia. Companies are set to invest up to US$15bn a year in exchange for lower labour cost and states subsides.

The Republic of Ecuador hit the international bond market for the fourth time in less than a year, raising US$1bn through a tap of its 9.65% 2026s at a yield of 9.125% - squeezing pricing from IPTs of the low-to-mid 9s. The deal, led solely by Citi, generated an orderbook of US$2.25bn.

Venezuela's President Nicolás Maduro hiked the minimum wage by another 50% this week, the 5th time the troubled Latin American country moved to raise the wage floor in less than a year. Analysts suggest the move is further proof the country is on the brink of economic collapse.

 

RUSSIA, CIS & EUROPE

Dutch telecoms infrastructure developer Vimpelcom agreed on a 13,000 towers network sale in Russia to Russian Towers Co., Interfax reported this week, in a deal estimated to the worth roughly US$700mn. The move appears to be a credit positive for both Russia-focused companies.

RSHB is to increase its share capital by RUB5.0bn through a new issue placement in favour to Russian Federation, according to multiple media reports.

Rosstat has confirmed its preliminary estimate of December 2016 CPI growth, which reached 0.4% month on month and 5.4% year on year. The positive surprise was down to lower food (4.6% vs 5.2%) and services inflation (4.9% vs 5.3%), according to analysts at ING.

 

ASIA

Indonesia's Finance Ministry announced new rules that require primary bond dealers to "safeguard" their partnership with the government and avoid conflicts of interest. The documents noted that the finance minister can revoke the license of a primary dealer if it does not fulfil the stated conditions.

South Korea’s unemployment rate fell in the final month of 2016, to a level not seen in more than a year and catching economists off guard. The unemployment rate slid to 3.4% last month from 3.6% in November, the lowest reading since October 2015.

State-owned Bharat Petroleum issued a US$600mn 10-year bond, reopening the dollar market in India after a prolonged hiatus. Rumours swirled last week that the company would look to issue up to US$1bn in fresh bonds.

The 870 megawatt Suki Kinari Hydropower Project, one of the largest private-sector hydropower projects in Pakistan, reached financial close this week. The project consortium – made up of Al-Jomaih Holding Company (LLC), China Gezhouba Group Company, and Haseeb Khan (Pvt) Ltd – secured US$1.8bn from Export-Import Bank of China (Chexim) and the Industrial and Commercial Bank of China (ICBC), and will be developed on a 30-year Build-Own-Operate-Transfer (BOOT) model.

Philippines President Rodrigo Duterte has approved the government's plan to raise up to US$2bn in international capital markets in a bid to fund the country's record deficit and repay existing debt, National Treasurer Roberto Tan revealed this week.

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