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The Daily Roundup

Iraq mandates banks for dollar bond – Masraf Al Rayan readies sukuk – Ethiopian Airlines secures US$159mn loan – Kenya to raise US$1.5bn loan – Argentina mandates banks for US$5bn trade -Peru will seek to bolster deals in Europe – Russia Yamal gets boost from Intesa, SACE, Coface – HSBC warns of subdued Chinese green bond issuance for 2017

Jan 12, 2017 // 6:30PM

MIDDLE EAST & TURKEY

The Republic of Iraq has mandated Citi, Deutsche Bank, and JP Morgan for a US$1bn 5-year bond guaranteed by the United States Agency for International Development (USAID), according to Reuters. In June last year, the war-torn country was shopping around for a US$2bn bond – which was delayed due to increasing market volatility and an uncertain interest rate environment.

Qatari Islamic lender Masraf Al Rayan, which is reportedly in merger talks with Barwa Bank and International Bank of Qatar, has mandated banks for a US$500mn sukuk. Abu Dhabi Islamic Bank, Dubai Islamic Bank, Emirates NBD, and Noor Bank are said to be working on the trade, according to Reuters.

 

AFRICA

Ethiopian Airlines has secured a US$159mn loan from the African Development Bank (AfDB) to help finance its expansion plan and fleet modernisation programme. The financing package, which comprises two tranches, will support the state-owned airline’s plans to double the size of its fleet and increase its revenue to US$10bn over the next decade.

Kenya will look to secure a US$1.5bn loan from local lenders including PTA Bank – which has already committed US$250mn – and a range of international banks, according to reports from Bloomberg. The country is looking to plug a widening budget deficit, which sits at 9.6% of GDP, and compensate for sub-optimal tax absorption for the latest fiscal year.

India has opened a US$100mn line of credit to Kenya, which will be used to jointly explore commercial development and bilateral trade opportunities in agriculture.

Nigeria is to issue a US$300mn diaspora bond after it was finally approved by the country's National Assembly. The move comes as the country looks to raise US$400mn from global multilaterals to finance new housing initiatives in the north of the country.

Zimbabwe's government has signed a concession agreement to finance the Beitbridge-Harare and Harare-Chirundu roads dualization project. The move paves the way for project sponsors to begin construction on the US$800mn project within the next three months.

A flagship project in Zimbabwe, the Hwange Power Station, is on track to reach financial close by March 2017 according to Noah Gwariro, Zimbabwe Power Company's Managing Director. The US$1.5bn project is being funded by the government and a number of Chinese lenders.

 

AMERICAS

Argentina has selected six banks to act as leads on upcoming US dollar bond sale, the country's ministry of finance announced on Tuesday. Santander, BBVA, Citibank, Deutsche Bank, HSBC and JP Morgan have been mandated on the deal. The size of the dollar deal is expected to be about US$5bn given that the government is also exploring other financing options, the ministry said.

Grupos Unidos por el Canal (GUPC), the contractor consortium that built the Panama Canal Expansion, is claiming US$5bn in cost overruns from the Panama Canal Authority (ACP). If the group succeeds with its claims, it will double the total cost of the project, which was originally US$5.4bn.

Brazil's Funding Agency for Studies and Projects (Finep) will receive a US$1.5bn 5-year loan from the Inter-American Development Bank (IDB) to help finance research and development into new biofuels, minerals and mining-related technologies.

Brazilian pulp and paper giant Fibria issued a US dollar-denominated green bond this week, launching the US$700mn 10-year trade at 5.70% before tightening final pricing to 5.5%. The book grew to over US$3bn.

Brazil's Central Bank cut its benchmark rate by a larger-than-expected 75bp to 13% as "widespread disinflation and weaker-than-than expected economic activity makes it already appropriate to frontload the monetary easing cycle, and allows the new pace of easing." The Central Bank of Brazil, which has now cut its rate by 125bp since October last year when it began its easing cycle, added further rate cuts and possible changes to the pace of easing would continue to depend on inflation forecasts and expectations.

Peru's Minister of Finance said Wednesday that he will seek to close deals on US$3bn in financing for state energy company Petroperu, including a loan from Spanish state-backed insurer Cesce, during a trip to Europe next week. In an interview with local broadcaster RPP, Finance Minister Alfredo Thorne said the money would allow Petroperu to pay for remaining upgrades at its Talara refinery and to repair its four-decades old pipeline that remains shuttered after a dozen oil spills in the Amazon last year.

 

RUSSIA, CIS & EUROPE

Poland's Central Bank left its key reference rate at 1.5%, as expected, but sounded cautiously optimistic about the economic outlook by saying there are signs of recovery in global industries and recent domestic data “signal some improvement in economic activity over the recent past.”

Russia’s S7 Airlines and Alfa Bank have conducted a deal using smart contracts over blockchain technology, despite Russia’s mixed feelings about Bitcoin and blockchain technology. The deal saw the practical application of blockchain technology for letter of credit settlements, says Deloitte, who advised on the deal.

Italian export credit agency SACE and bank Intesa Sanpaolo have paired up to offer a €400mn line of credit to finance Italian companies working on the Russian Yamal liquefied natural gas (LNG) project, despite continued US and European sanctions against Russia. Intesa will issue the money, as part of two credit lines for the project, while SACE will guarantee the finance, which has been earmarked for Italian subcontractors. The second Intesa credit line is for €350mn and is backed by French ECA, Coface.

 

ASIA

The Reserve Bank of India (RBI) is considering introducing a uniform rate of withholding tax for overseas borrowings, irrespective of type and currency, a move that could make foreign investment cheaper for investors and companies domiciled in India.

HSBC expects issuance of green bonds globally to be at around US$90bn to US$120bn this year, growing up to 30% through 2017. The investment banks said it expects global issuance year on year to remain subdued, however, in part due to lower supply from Chinese entities. In 2016, Chinese green bonds made up 37% of total issuance - a "one time" thing, according to the bank - compared with 2% in 2015.

The People's Bank of China (PBOC) launched spot checks on leading Bitcoin exchanges in Beijing and Shanghai in a bid to stem potential capital outflows and relieve pressure on the yuan.

China has established a new US$20bn fund in conjunction with the Brazilian government which will be used to invest in the South American country's infrastructure including ports, rail networks, and roads. The move comes at a time when domestic capacity to fund these initiatives remains constrained.

Foreign direct investments from China into other countries soared 40% to a record €180bn (US$189bn) in 2016 from a year earlier, according to a study released on Wednesday by Berlin-based Mercatur Institute for China Studies (MERICS) and Rhodium Group. Chinese investments in the European Union rose 77% to over €35bn in 2016.

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