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The Daily Roundup

Kuwait loan growth hits 5-year low – Dubai Arabtec mulls AED1.5bn rights issue – UAE plans new debt law – Sibanye finalises US$2.65bn loan – Tunisia sells €850mn – Argentina to extend local market borrowing this week – Petrobras rating upgraded – Mexico CB hikes 50bp – PBOC presses play on repos – China mulls huge aluminium, steel production cuts – Rosneft may divest loss-making refineries – Poland drops mortgage loan re-denomination efforts

Feb 13, 2017 // 6:07PM

MIDDLE EAST & TURKEY

Loan growth in Kuwait this past December reached its slowest pace since 2012, according to newly published figures from the country's Central Bank. Average loan growth dropped to 2.5% in December 2016, down from 4.1% the previous month. Analysts suggest borrowers are holding off due to the increased cost of borrowing resulting from an oil-induced liquidity crunch in the country.

Arab Bank Chairman Sabih al Masri and consortium of investors have acquired Oger Middle East Holdings's 20% stake in Arab Bank Group, according to local press reports. It is one of the Middle East's largest private banks.

UAE builder Dubai Arabtec is planning a AED1.5bn rights issue as part of a broader restructuring plan. The company recently reported widening losses in Q4 last year, raising further questions about the builder's financial health.

The UAE is planning on passing a new debt law that would allow the country to raise money in the international capital markets at the federal level, said Younis Al Khouri, the undersecretary at the Finance Ministry. Al Khouri said the bank is currently in talks with the UAE Central Bank on the law, which was originally supposed to be introduced last year but was delayed.

The Central Bank of Bahrain’s (CBB) issued BHD70mn of Government Treasury Bills carrying a maturity of 91 days, the government announced. The bills are issued by the CBB, on behalf of the Government of the Kingdom of Bahrain.

AFRICA

South African miner Sibanye Gold secured a US$2.65bn triple-tranche financing facility to fund the acquisition of Stillwater Mining Company, a US miner of platinum and palladium. The package includes a US$750mn bridge-to-equity facility, will be repaid following the planned rights issue following the acquisition's completion; a US$300mn bridge loan; and a further US$1.6bn bridge loan to be refinanced in the capital markets. ABSA Bank, Barclays Bank, Banca IMI S.P.A., Credit Suisse, FirstRand Bank, Morgan, Mizuho, Morgan Stanley, RBC, Société Générale, The Bank of Nova Scotia, The Bank of Tokyo-Mitsubishi UFJ, Ltd., and Standard Bank were mandated leads. BNP Paribas and Nedbank joined as joint lead managers.

Tunisia hit the market this morning, selling €850mn in 7-year bonds carrying a coupon of 5.625%. The bonds were priced at 99.296% to yield 5.6649%. Commerzbank, JP Morgan, and Natixis managed the trade.

Nigeria recovered more than US$160mn in alleged corruption proceeds last week from four people, including US$9.2mn from a former head of the state-owned oil company, Bloomberg reported. Since the election of Muhammadu Buhari, several former government officials, including army generals, have faced trial for corruption, which PricewaterhouseCoopers estimated in a report last year could cost the country 37% of its gross domestic product by 2030.

AMERICAS

Argentina plans to sell up to US$4bn in debt in the local market, offering up to US$1.5bn in short-term treasury notes in dollars and nearly US$2.5bn treasury bonds in pesos. Argentina will sell two dollar-denominated treasury notes of up to US$750mn each.  The maturity dates are May 26 and August 25. According to finance minister Luis Caputo, the sovereign would also sell longer-term peso-denominated treasury bonds, with a 2021 note carrying a yield of 18.2%, a 2023 note yielding 15.5% and a 2026 note yielding 15.5%

Private power company Stoneway Capital raised US$500mn to finance four power projects in Argentina.

S&P Global Ratings upgraded the credit rating of Brazilian state-owned oil company Petrobras to 'BB-' from 'B+' and its Brazilian national scale corporate credit rating to 'brA' from 'brBBB-'. The rating agency cited new pricing plans and improved governance standards at the company, and a material improvement in its liquidity position as the price of oil continues to rise.

A Brazilian federal court suspended the US$5.2bn sale of state-controlled Petróleo Brasileiro SA's natural gas pipeline unit to a group of investors led by Canada's Brookfield Asset Management Inc. According to Reuters, the Sergipe state-based court ruled the transaction, which was to be closed within weeks, be halted because of discrepancies in the way Petrobras proceeded with the sale. Petrobras is expected to appeal the decision.

Construction is set to start on a light-rail transit (LRT) project located in the Cochabamba area of Bolivia. The 42.5 km rail system is being financed by a US$504mn loan committed by German development bank KfW and Credit Suisse, according to local state-owned press.

Moody's revised the outlook on the Government of Costa Rica's 'Ba1' issuer rating to 'negative' from 'stable'. The decision to modify the outlook reflects expectations that the lack of political consensus to reduce the fiscal deficit will continue to put pressure on the government's rising debt burden. Costa Rica's public debt, which will reach 47% of GDP this year, has increased every year since 2008 when it was almost half the current level at 25%.

El Salvador is looking to tap the international debt markets after the country’s Congress greenlit a $550m bond issue in November. The Central American sovereign is in dire need of the cash to shore up liquidity levels and keep up payments to creditors, but the government’s plans for a bond issuance have been met with public disapproval.

Mexico's Central Bank raised its benchmark target for the overnight interbank rate by another 50bp to 6.25% to anchor inflation expectations and prevent that a drop in the value of the peso spills over to consumer prices and leads to even higher inflation. Overall the Bank of Mexico has now raised its rate by 325bp since the U.S. Federal Reserve's rate hike in December 2015 and by 100bp since the election of Donald Trump as U.S. President.

ASIA

China's Central Bank has resumed repo sales this week after a six-day pause, it said on its website. The PBOC sold CNY100bn (US$14.5bn) in reverse purchasing agreements as it seeks to avoid excessive tightening of the money supply. The Bank sold CNY20bn of 7-day repos, CNY30bn of 14-day repos, and CNY50bn of 28-day repos.

Chinese LGFV Ejin Horo Qi Hongtai City Construction and Investment redeemed its 2019 bonds in full last week in a move it said was aimed at avoiding incurring future losses on investors. The cash-strapped LGFV paid RMB960mn (US$139mn) of an initial RMB1.6bn bond issued in 2012 with a coupon of 8.35%, becoming the first LGFV to have carried out an early bond redemption successfully.

China is said to be considering forcing steel and aluminium producers to drastically cut output in a bid to reduce pollution and toxic emissions, according to a report from Reuters. Rumours swirling since December last year suggested the Ministry of Environmental Protection (MEP) could force metals producers to cut up to 12% of their output, but the most recent reports - which suggest we could see up to 8% and 17% cuts for steel and aluminium producers - are based on a draft proposal obtained by the news agency.

China’s top foreign exchange regulator says the country will not follow the “old road of capital controls,” as the government seeks to reassure investors that their money will not be trapped in China following recent measures to restrict capital outflows. The recent measures to keep money onshore included tighter approval procedures for foreign acquisitions by Chinese companies and higher hurdles for FX purchases by individuals. 

The Bangko Sentral ng Pilipinas could raise interest as early as March as it waits a crucial interest rate decision from the US Federal Reserve. The Central Bank kept its key interest rate level at 3% last week, but it raised its inflation forecast to 3.5% from 3.2%.

India industrial production fell 0.4% year on year in December, according to recently published official figures. The results were well below analyst expectations of 1.2% growth year on year.

India’s monthly oil demand fell the most since May 2003 as the government’s crackdown on high-value currency notes continued to reverberate through the country’s US$2tn economy. Fuel consumption fell 4.5% to 15.5 million tons in January from 16.2 million tons a year ago, the Oil Ministry’s Petroleum Planning and Analysis Cell said Friday. Diesel use dropped 7.8% to 5.8 million tons, the biggest decline since September, while gasoline consumption fell the most since June.

RUSSIA, CIS & EUROPE

Rosneft is in the process of selling off loss-making refineries, Russian news site Vedomosti reported Friday. The news agency cited sources who claim that new tax rules have pushed some of the recently privatised company's oil refineries beyond commercial viability.

Russian Railways announced plans to invest up to US$1bn into the development of Slovenia’s ailing rail networks. The announcement follows a meeting between Russia’s president Putin and his Slovenian counterpart.

Poland’s ruling party last week dropped plans to force lenders to convert US$36bn in CHF and euro-denominated mortgage loans. Law and Justice Party leader Jaroslaw Kaczynski apparently reversed a previous pledge to force lenders to bear the cost of converting the loans, an expensive proposition that left a sour taste in the mouths of mortgage lenders and borrowers.

Poland's Deputy Finance Minister Piotr Nowak said that the pace of raising government debt in the coming months will slow down, as the ministry has already fulfilled 40% of its borrowing needs for the year. "The dynamics of (debt) financing will slow down in the coming months, there is no need for large auctions," Nowak said, quoted by Reuters on Monday.

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