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The Daily Roundup

RMB Namibia issues first inflation-linked bond – World Bank, Kenya partner on agriculture programme – Nigeria looks to huge asset divestment programme – Venezuela clamps down on Odebrecht – Albanesi secures US$175mn project finance facility – Pemex prices record euro trade – India to cut subsidies to state-owned lenders – Yingde, Air Products deal stalls – Russian Railways picks banks for bond – Russia MinFin mulls new VAT rate

Feb 15, 2017 // 6:13PM

AFRICA

RMB Namibia issued its first inflation linked bond this week through a private placement. The 5-year notes were mostly allocated to local banks and institutional investors, and pay coupons semi-annually.

Arise, a private equity firm, announced it will extend a US$50mn bridge loan to Uganda's dfcu Group, a local lender, which will help the bank meet its regulatory capital thresholds. The move comes shortly after the bank acquired another local lender, Crane Bank Limited, which has placed in receivership last year.

The World Bank and Kenya are doubling down on supporting the country's agriculture sector. The multilateral lender just approved a KES24.9bn (approx. US$250mn) loan to support a Smart Farming programme in the country. The programme, which will run for five years, will help increase agricultural productivity and build resilience to climate change risks - particularly for smallholder farming communities.

Budget documents reportedly seen by Bloomberg suggest the Nigeria could look to raise up to US$16bn from targeted asset sales in a bid to reduce the government deficit. The government is also looking to raise up to US$5bn abroad over the next three years. According to official figures, Nigeria's government debt to GDP rose to 17% in 2016, nearly doubling from the previous year.

South Africa's Minister of Finance Pravin Gordhan has told fellow cabinet members that the renewal of a contract expiring this April with a division of Net 1 UEPS Technologies Inc, which oversees welfare payments to over 16 million South Africans, would be illegal, according to a report from Bloomberg. The move raises questions about Minister of Social Development Bathabile Dlamini's plans to renew a public sector contract with Cash Paymaster Services, a division of Net 1. Despite re-advertising the tender, none of the three bids received were considered workable, suggesting that the government will either have to change the law to allow a contract renewal or find an alternative payments processing solutions provider.

Uganda's Central Bank cut its benchmark lending rate by 50bp to 11.5% after the economic growth outlook worsened due to poor weather, its governor said on Wednesday.

Algeria's El Hamdania Port project has secured over US$2bn from a syndicate of Chinese lenders and a US$900mn 20-year term loan from the African Development Bank (AfDB). The port, which will be located close to the town of Cherchell, West of Algiers, will cost roughly US$3.3bn to develop, and was approved by the government early in December. The port is being developed by China Harbour Engineering Company and China State Construction Engineering Corporation, which will command a 49% stake in the project. The Algerian Port Authority will maintain a majority stake and operate the port. Construction is due to begin in March.

AMERICAS

Chile's Central Bank held the benchmark interest rate at 3.25% at its monthly meeting on Tuesday, but said fresh monetary stimulus was probable in the short term. The Central Bank cut the rate 25 basis points last month, the first time in a year that it had moved the dial, as economic growth and investment in the top copper exporter has remained weak, while formerly above-target inflation has cooled rapidly.

Venezuela’s police searched Odebrecht’s Caracas offices as it looks to expand a corruption probe into the troubled Brazilian construction group's dealings in the country. Police are reportedly searching for links between political officials the construction group.

The Brazilian real gained on Wednesday, rising to its strongest level in more than a year and a half, following a rise in capital inflows and after the Central Bank resumed currency interventions following a two-week pause. The real firmed 0.45% to 3.096 real per dollar, its strongest showing since July 2015. The Central Bank indicated it could allow around US$4.3bn worth of currency swaps, which function like future dollar sales, to expire next month.

As part of the airline's restructuring plan, Gol announced a sale and leaseback deal for five Boeing 737 aircraft. The aircraft are worth a total of US$550mn, the company said in a statement to press.

Grupo Albanesi secured a US$175mn project finance facility from UBS, which will be used to develop an electricity co-generation plant. The deal was secured through an offshore SPV, and will be backed by revenues from CAMMESA and a private off-taker.

Argentina's Central Bank kept its monetary policy rate unchanged at 24.75% for the eleventh consecutive week on Tuesday, saying consumer price expectations showed "mixed signals." Consumer prices in greater Buenos Aires rose 1.3% in January, far below expectations.

Peru's Economy and Finance Minister Alfredo Thorne said the government is looking to prioritise a series of reforms aimed at increasing domestic productivity, including formalising the labour force and improving SME access to credit, according to local press reports. Thorne said the country is looking to implement changes that allow the country’s lenders to extend more credit to small and medium-sized businesses.

Pemex priced a €4.25bn triple-tranche bond this week, the largest euro-denominated bond in emerging markets to date. The state-owned Mexican oil and gas producer priced a €1.75bn 2021 tranche at 99.957% to yield 2.5011%; a €1.25bn 2024 tranche at 99.463% to yield 3.7702%; and a €1.25bn 2028 tranche at 99.135% to yield 4.9175%. BNP Paribas, Credit Agricole CIB, Deutsche Bank, and HSBC were bookrunners on the trade.

ASIA

China's Oversea-Chinese Banking Corporation Limited raised US$500mn in senior bond notes maturing in 2018. Proceeds from the notes, which were sold at MS+49bp, will be used for general funding purposes.

China's Central Bank said it lent CNY393.5bn (US$57.30bn) in medium-term loans to 22 banks in 2016, part of the bank's toolkit for managing banking system liquidity. The announcement comes just two days after the PBOC said it resumed reverse repo sales. It also sold CNY120bn in 7, 14 and 28-day reverse repos on Wednesday, but left rates unchanged.

Ronshine China plans to issue up to US$225mn 6.95% senior notes due 2019, according to a report in Reuters.

Chinese telecoms equipment manufacturer Proven Glory Capital Ltd. hit the market with a US$1.5bn dual tranche offering this week, pricing a US$1bn 2022 tranche at 99.767% to yield 3.2576%, and a US$500mn 2028 tranche at 99.081% to yield 4.0371%. Bank of China, Citigroup, DBS Bank, HSBC, and Standard Chartered Bank managed the sale.

A proposed takeover of Yingde Gases Group by Air Products & Chemicals Inc. is facing challenges after the CEO of the latter said in an open letter that Yingde Gases was obstructing the due diligence process. The two companies reached a tentative deal on the acquisition in January, but has since stalled.

Malaysia's Digi Telecommunications Sdn Bhd has secured the Securities Commission's blessing for a MYR5bn Islamic medium term note programme (IMTN), which will be rolled out later this year. The company will issue at least five issuances of Islamic commercial paper of up to MYR1bn. The programme is due to wrap up in 15 years following the first issuance.

India's Housing Development Finance Corporation (HDFC) Is reportedly looking to sell up to Rs5,000 crore (approx. US$750mn) in fresh Masala bonds ahead of a potential interest rate hike in the US, according to local press reports. It last issued in August last year, when it raised US$450mn from local and international investors in notes due 2019.

India could cut subsidies to state-owned lenders INR78bn (approx US$1.2bn) due to slower than anticipated loan growth, according to a report from Bloomberg. The government has already deferred INR21bn of the INR250bn it planned to inject by March this year, and could defer another INR57bn this year.

S&P lowered its rating on IDBI Bank Ltd. to 'BB' from 'BB+', citing continued deterioration of the bank's asset quality and sizable exposure concentrated among a few struggling sectors, particularly infrastructure. The bank recently reduced its marginal cost of funding rate in a bid to stimulate further loan growth.

RUSSIA, CIS & EUROPE

Russia's Finance Ministry said it plans to sell up to RUB40bn (approx. US$610mn) in OFZ treasury bonds at two auctions this week. The Ministry said it plans to sell about RUB15bn in OFZs maturing in 2022 and RUB25bn in notes due 2026.

Russian Railways has picked JP Morgan and VTB Capital, part of Russia's second-biggest bank VTB, to arrange investor meetings for a possible dollar-denominated Eurobond offering, Reuters reported on Wednesday, quoting sources close to the deal. The meetings are expected to take place on February 20-21 in London.

The Russian Finance Ministry and the Ministry for Economic Development are in discussions over a proposed plan to lower insurance premiums and raise the VAT rate - both to 21%. Russia’s current VAT rate stands at 18%, while the average insurance premium rate currently is 26%.

Armenia's Central Bank cut its refinancing rate by 25bp points to 6% this week, continuing its policy of gradually reducing the interest rate since mid-2015. The Central Bank brought the rate down from 10.5% in June 2015 to 6.25% in December 2016. It also reported January inflation at 2.7%, up from 2.2% the month before.

Local press reports suggest Slovenia hopes to divest a 75% from Nova Ljubljanska Banka, the country's largest state-owned lender. Reports in the Delo newspaper said the government could look to gain up to €1bn from the sale. The government is required to sell its stake in the bank by the end of 2017, one of the conditions attached to securing aid from the European Union.

Poland’s economy unexpectedly expanded more than anticipated in the fourth quarter of 2016, according to new data published by the country's Ministry of Economy. The economy expanded 2.7% in the last quarter, up from 2.5% during preceding three months.

Serbia needs to stop subsidizing unprofitable state companies to lock in progress the largest former Yugoslav republic has made in cutting the budget, stemming one of the largest drains on state coffers, the local head of the International Monetary Fund said. “Fiscal costs from loss-making state-owned enterprises need to be plugged,” said Sebastian Sosa in an interview on Tuesday.

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