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The Daily Roundup

Saudi Electricity Co. to extend buyback offer date – Bugan Bank to decide on sukuk – South Africa retail sales sluggish – Barclays Africa Group stumbles on bond sale – Moody’s upgrades Brazil outlook – Petrobras to continue divestment efforts – AA200 finalises exchange offer – S&P downgrades Cemig – Fefa readies triple tranche bond – Tanjung Bin Energy Sdn Bhd, UEM Edgenta Bhd hit the sukuk market – China follows Fed, raises repo rate

Mar 16, 2017 // 6:19PM


Middle East & Turkey

Saudi Electricity Company may extend the purchase date on a buyback offer for its SAR Sukuk due 2030, according to a regulatory note. HSBC Saudi Arabia Ltd., NCB Capital Company and Samba Capital & Investment Management Co. are advising the company on the buyback.

Kuwait's Burgan Bank will convene a shareholder meeting later this month in a move aimed at approving the issuance of new bonds, according to a regulatory note. The bank is currently looking to raise its paid-up capital.

Moody's has maintained a stable outlook on the Kuwaiti banking system, citing government commitment to maintain spending levels and bolstering the economy's performance. "A record amount of projects under execution will create corporate lending opportunities for banks. We expect 6%-7% credit growth over the outlook horizon of 12 to 18 months. The risk of project holdups going forward has increased, however, with the election of a new parliament in late 2016 in which government opposition groups won a large representation,” Moody's Vice President Alexios Philippides said in a statement.



In South Africa, January retail sales fell to -2.3% year on year from an upwardly revised 1.0% year on year in December. Negative contributions came from semi-durable and durable goods as well as other retailers, according to analysts at Standard Bank.

The African Development Bank will price new dual-currency bond this month, part of the bank's medium term note programme. The bank plans to tap the Indonesian market for a IDR23bn (approx. US$1.7mn) bond due 2021.

Barclays Africa Group sold less than half its target in a bond auction this week, the bank acknowledged. The bank offered ZAR1.5bn in fresh bonds but only received ZAR643mn in orders. The notes were being sold at JIBOR+378bp. Some analysts believe the lender was crowded out of the market by other South African banks, while others cited concerns around the impending exist of its UK parent and its impact on the lender.



Moody's has upgraded the outlook on Brazil (Ba2) to stable, pointing to a broad stabilisation in the Brazilian economy and falling inflation. Pension and labour reforms, which are expected to be finalised in the second half of 2017, were also considered positives for the rating agency.

Marfrig announced a tender offer for its outstanding 2018 and 2020 US dollar denominated notes. The Brazilian beef producer will use the proceeds from a recent US$750mn bond 7.5% bond sale to take out US$228mn of its 8.375% 2018s and its 9.50% 2020s, some of the company's most expensive debt.

New rules passed by Brazilian courts will allow Petrobras to continue its divestment efforts, according to local press reports. The new rules give the government direct oversight over the divestment process. The company has about 40 projects within Brazil and abroad that are earmarked for divestment.

Aeropuertos Argentina 2000 (AA2000) has finalised an exchange offer, according to a note sent to the country's capital markets regulator. The company used part of the proceeds from an US$800mn debt sale in January to repurchase about US$300mn in notes due 2020.

Latin America is still divided over how best to deal with an eroding economy and political environment in Venezuela, with many of the country's neighbours still booged down with their own domestic challenges, according to Teneo Intelligence Analyst Nicholas Watson. "Brazil remains preoccupied by domestic corruption challenges, while Colombia still needs Venezuela onside while peace talks with the National Liberation Army (ELN) proceed. The OAS is still seen as a tool of US diplomacy by some in the region, and US policy towards Venezuela does not necessarily play well in Latin America, particularly at a time when US policy towards Mexico threatens to create region-wide rifts. Meanwhile, the Union of South American Nations (UNASUR) is seen as too close to the Maduro administration," Watson said in a recent note.

Panama has signed two loans worth a US$245mn loan with Latin American Development bank CAF to finance the development of water treatment and education projects in the country. The loan package includes a US$150mn facility that will be put towards the creation of a new high education technical institute, and a US$95mn facility that will fund water management projects in Burunga and Arraiján, areas bordering Panama City.

S&P this week downgraded Companhia Energetica de Minas Gerais's (Cemig) credit rating from 'B+' to 'B', citing risks of continued potential state government interference and an erosion of its capital position. "The downgrade reflects our view that Cemig is exposed to the overall fiscal weakness of the state of Minas Gerais, which compare negatively with some of its utilities peers, and could influence to some extent the perception of risk  among potential lenders and creditors to Cemig," the rating agency said.

Mexico's Fondo Especial para Financiamientos Agropecuarios (Fefa) is readying a triple tranche-bond for the domestic market, according to sources. A total hasn't been confirmed, but the variable-rate notes will be split into 2018, 2020 and 2022 maturities.

ConCredito - Bursatilizaciones de creditos is looking to raise up to MXN500mn through the sale of new notes due 2020. The notes will be back by a pool of loans disbursed through the company's coupon system.



Chinese conglomerate Fosun International Ltd is said to be readying the sale of fresh senior unsecured notes. The notes, which will be denominated in US dollars, will be sold through an SPV, Fortune Star, with the proceeds of the sale going towards new mergers & acquisitions, refinancing, and general corporate purposes.

China raised its reverse repo rate following the US Federal Reserve's interest rate hike. The PBOC hiked the 7, 14 and 28-day repo rates by 10bp each.

Fitch Ratings has put India’s recapitalization requirements at US$90bn by 2019, while the government has committed only US$10bn in fiscal resources. Analysts believe the gap will create significant challenges for the recently emboldened Modi government, particularly as credit growth continues to remain subdued.

Tanjung Bin Energy Sdn Bhd, a unit of independent power producer Malakoff Corp, issued a MR800mn (approx. US$800mn) sukuk this week, according to a regulatory filing. CIMB, Maybank IB and RHB Investment Bank Bhd were joint leads on the sale. Proceeds from the sukuk sale will help the company refinance a MYR1.29bn term loan.

UEM Edgenta Bhd, an infrastructure services provider, has established a new Islamic Commercial Paper and Medium Term Note programme that will see the company issued up to MYR1bn (approx. US$225mn), it said in a regulatory filing. Proceeds from the notes will go towards general corporate purposes.

Mongolia could see economic growth ranging between 7-8% once it enacts a series of reforms that will help set the struggling country back on the right track, IMF Resident Representative for Mongolia Neil Saker said this week. The IMF along with a number of other lenders recently sealed a US$5.5bn bailout package to help the country recover from dwindling commodities revenues and government overspending.

EM currencies are stronger after the Fed’s hike, with South Korea's won leading the way with a 1.1% rise against the US dollar, and the South African rand, which jumped 1% against the greenback. Impressively, the Mexican peso was flat against the US dollar after a brief 2% rise on Wednesday. Most noteworthy is that longer-dated US bond yields retracted, with US 10-year bond yields dropping from 2.60% yesterday to 2.49% Thursday morning.

The Bank of Japan kept its two key rates and monetary easing program unchanged on Thursday. The BOJ maintained its short-term policy rate on bank reserves at -0.1% and left its target for 10-year government bond yields at close to 0%.


Russia, CIS and Europe

Russian gas giant Gazprom has again lowered the yield guidance for 10-year U.S. dollar-denominated Eurobonds to 4.95–5% from 5–5.125% and the initial guidance of 5.25%, Russian agency PRIME reported on Tuesday. Initial bidding book saw demand for the expected US$1bn bond exceed US$2.5 billion after the company held a road show for the Eurobonds in the U.S. on Monday and Tuesday, with Gazprombank, J.P. Morgan, Mizuho Securities and SMBC Nikko assigned as the organizers.

Russia’s Alfa-Bank plans to hold a road show of euro-denominated Eurobonds in London and Continental Europe on March 20–21, a banking source told PRIME on Thursday. The bank will place the Eurobonds with a maturity of three or five years depending on market conditions. Alfa-Bank, ING and UBS will organize meetings with investors and the subsequent placement. Meanwhile, Phosagro, one of Russia’s biggest fertilizer producers, also reaffirmed its plans to tap the markets in spring or autumn 2017, in order to refinance its US$500mn worth of bonds.

Kazakhstan said that it will spend KZT2.4tn (US$7.5bn) to buy assets from troubled Kazkommertsbank in its biggest bank bailout since 2009. The country's Central Bank Deputy Governor Oleg Smolyakov told investors there would not be any debt restructuring or conversion of debt to equity at the bank. The move could give a boost to Kazkommertsbank's potential merger plans with Halyk Bank.

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