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The Daily Roundup

Aramco to deploy hybrid structure on US$2bn sukuk – Turkey’s Hayat Varlik secures fresh loan from EBRD, ICBC – South Africa data boosts rand, bonds – Nigeria currency woes start to ease – Zenith Bank pulls NGN100bn capital raising plans – Oi cements new restructuring plan – BNDES not mulling loan rethink for beef industry – Argentina’s former president to stand trial – Chile on track for recession – Singapore plans ambitious green bond grant programme – State Bank of India approves new bond plans – Alfa Bank successfully prices euro trade

Mar 24, 2017 // 6:31PM


Middle East & Turkey

Saudi Aramco has reportedly adopted a hybrid structure for its upcoming sukuk, according to Reuters. The sukuk, which will be denominated in riyals, will adopt a murabaha commodity-backed structure for about half the facility according to a prospectus. No total has been confirmed for the sale, but observers believe it could look to raise up to US$2bn in its first sale and up to US$10bn in total through subsequent debt sales.

Moody’s gave Oman a Baa1 rating with a stable outlook, based on its high wealth levels and a still comparatively strong government balance sheet.  For 2016-2020, the rating agency forecast real GDP growth in the Arab country will be around 2.1% per year on average, significantly lower than the 3.8% average annual growth seen between 2011 and 2015.

Turkey's Hayat Varlik, the country's largest manager of non-performing loans, has secured a TRY120mn (approx. US$33mn) from the European Bank for Reconstruction and Development (EBRD) and the Industrial and Commercial Bank of China (ICBC). Proceeds from the loan will go towards paying out existing maturities. Hayat Varlik recently merged with Turkasset, which was previously the largest player in the NPL market.



South African current account and inflation data boosted the rand and pushed local bond yields lower on Thursday.  The current account deficit compressed to -1.7% of GDP in the fourth quarter of 2016, from an upwardly revised -3.8% of GDP in the third quarter, while CPI moderated in line with expectations to 6.3% year on year, with core inflation hitting 5.2%. Meanwhile, yields on 10-year government bonds tightened by 6bp to hit 8.27%.

Tunisia expects the IMF to shortly release the US$350mn second tranche of a US$2.8bn loan following a three-month delay, a senior official said on Thursday. The IMF postponed payment from December because of lack of progress on reforms, which included cuts to the public-sector wages. According to Ridha Saidi, an economic advisor to the prime minister, the government will start reducing the number of public sector employees immediately and that the IMF is satisfied with that plan.

Nigeria's naira firmed to 390 per dollar on the black market on Friday, up 2.6% from its previous session and near the Central Bank's rate for consumers, Reuters reported. The CBN has been intervening on the official market to try to narrow the currency spread with the black-market rate, which was NGN520 to the US dollar a month ago after it devalued the naira for retail customers to NGN375.

Nigeria's Zenith Bank recently backed off plans to raise up to NGN100bn through the issuance of depository notes due to increased market volatility, it said. “We thought we might raise additional capital via GDR but the macroeconomic condition is not improving as we thought so we had to withdraw it,” the bank's head of investor relations told press this week.

Nigeria announced it raised NGN2.07bn from a new two-year savings bond intended for retail investors. The largest economy in Africa forecasts a budget deficit of NGN2.36tn naira in 2017, half of which it aims to fund through domestic borrowing.

Tanzanian President John Magufuli warned media organizations against “inflammatory” reporting, a day after he fired a cabinet minister for defending press freedom. “Media owners, let me tell you: Be careful. Watch it,” Magufuli said Friday, quoted by Reuters. “If you think you have that kind of freedom -- not to that extent.”

Kenya successfully placed about KES150mn (approx. US$1.5mn) in government bonds on the recently launched M-Akiba mobile platform, it said this week. By most measures, the sale went very well - about 200 investors placed KES600,000 in orders within the first half hour of the sale going live. The sale was a test run ahead of its planned KES4.85bn sale through the recently launched platform in June this year.

Investors should be concerned about the growing discrepancy between private and state-owned banks in Angola, according to a note from Fitch. "ate-owned banks are undergoing restructuring and face greater challenges over capital, foreign-currency (FC) liquidity and asset quality. A weak operating environment weighs heavily on the performance of all Angolan banks and sluggish credit demand has taken its toll. However, the data mask sharp differences between them," the rating agency said, adding that state-backed recapitalisations have masked the extent of foreign currency liquidity shortages at some public sector-owned institutions.

Zimbabwe's National Building Society (NBS) is looking to raise up to US$150mn to develop about 10,000 houses, in part through the capital markets, the organisation's managing director Ken Chitando said.



Brazilian telecoms operator Oi approved changes to its reorganisation plan that will see a grave period of four year of interest payments for class 2 creditor and a six-year grace period for class 3 creditor, in addition to offering optional equity conversions. The deal will also see the company issue up to BRL2.8bn in fresh bonds as well as a BRL3.9bn callable contingent convertible bond.

Brazil's Central Bank forecast a larger current account deficit for this year of US$30bn on Friday, compared to a previous projection of US$28bn, as it expects more spending by Brazilians abroad and higher profit remittances by multinational companies. Brazil's current account deficit widened more than expected in February to US$935mn, central bank data showed, while the country’s 12-month current account deficit was equal to 1.24% of GDP in last month.

Brazil's state development bank BNDES said it is aware news of a police probe into alleged bribery of inspectors by Brazilian meatpackers, but has no plans to review loans to the industry, bank president Maria Silvia Bastos said on Friday. "Apparently, the issues are contained and for now we aren't taking any measures, just accompanying developments," she told journalists, quoted by Reuters.

In response to growing concerns around beef exports from Brazil, JBS - one of the country's largest producers - shut 33 out of 36 of its slaughterhouses for several days and implemented steep short-term production cuts. So far 18 countries have imposed restrictions on Brazilian beef imports, accounting for about 48% of Brazilian meat exports.

US-born former finance minister of Ukraine Natalie Jaresko, who steered Ukraine through an IMF aid programme and debt restructuring, announced on her Facebook page that she had been appointed new chief executive of the Financial Oversight and Management Board for Puerto Rico.

Chile looks on track to dip into a recession for the first time since 2009, according to fresh government data. The Central Bank reported this week that the economy shrank by 0.4% quarter-on-quarter in the final quarter of 2016, following a decline of 0.3% in the previous quarter. The country has been hammered by strikes at one of the country's largest mines, Escondida, which shows no signs of easing anytime soon.

Rising interest rates are likely to weigh on Mexico's growth performance and the country's issuers, particularly those who rely overwhelmingly on local sources of funding, according to a report from Moody's. "Asset risk will rise for Mexican banks in all lending segments, as the continued increase in rates pressures borrowers, especially corporate customers that have taken on variable rate commercial loans, and individuals with consumer credit," the credit rating agency said. "As lending rates increase, however, Mexico's largest banks will benefit from wider net interest margins due to their access to low-cost retail deposit funding, which tends to be sticky and insensitive to changes in interest rates."

Italian oil company Eni has discovered “significant” reserves of oil off the coast of Mexico after becoming the first international oil company to drill in Mexico since the country opened up its sector to private investment in 2013. Eni won the block in the Bay of Campeche in south-east Mexico in September 2015, and was confident that there was oil in the area after Pemex had conducted some exploratory work in the territory previously.

Inflation in Mexico reached its highest levels in eight years, increasing to 5.28% in February. Inflation expectations for the full year 2017 were revised upward to 5.48%.

Argentina sold an oversubscribed CHF400mn (approx. US$403mn) bond on Thursday, the first of two or three Swiss Franc-denominated bond sales to come this year, the country's Finance Minister Luis Caputo said this week. The notes maturing 2020 carry a coupon of 3.375%. The trade was managed by BNP Paribas, Credit Suisse and UBS.

Former Argentine president Cristina Fernandez de Krichner is to stand trial on charges of fraudulently administering state funds, alongside the former Central Bank governor and the former economy minister. Fernandez is accused of forcing the Central bank to sell dollars on the futures market at artificially low prices ahead of the peso's devaluation.



Chinese property development firm Emperor International Holdings priced a US$200mn 5-year trade this week. The notes maturing 2022 were sold at par to yield 5%. AMTD Asset Management Limited, Bank of Communications, BNP Paribas, Bank of China, CCB International, Guotai Junan Securities, Emperor Securities, HSBC, and ICBC managed the sale.

China's 7-day repo rate hit a 3-year high of 9.5% this week, more than triple the average seen over the past two years as new regulations aimed at curbing overreliance on short-term funding came into effect.

Malaysia's Central Bank said it would crackdown on FX currency manipulation and exchange rate fixing to help stabilise the ringgit, Governor Muhammad Ibrahim said. Speaking to press this week the central banker said the Bank would name and shame institutions caught engaging in currency manipulation practices, including the scale of the fines imposed on them.

Singapore plans to rollout grants for green bond issuances, National Development Minister Lawrence Wong said this week. Under the programme, issuers placing green bonds of at least US$200mn with a 3-year maturity will be entitle to offset up to US$100,000 of the costs associated with obtaining independent reviews and certifications. The move could serve to attract foreign institutions to issue bonds in its jurisdictions.

Moody's assigned Baa3 rating to Indonesia's planned US dollar denominated sukuk. The rating to the sukuk issuance was in line with the sovereign’s Baa3 issuer rating, given government's direct obligation.

Indonesian agrifood producer Japfa Comfeed successfully placed US$150mn in 5-year notes this week. The notes maturing 2022 priced at 99.462% to yield 5.7% and pay a coupon of 5.625%, tighter than initial price thoughts of 5.875%. The book generated about US$550mn in orders from 85 accounts.

Sri Lanka's Central Bank raised its key policy rates by 25bp in what it said was a precautionary measure to "contain the build-up of adverse inflation expectations and the possible acceleration of demand side inflationary pressures through excessive monetary and credit expansion." Meanwhile, the Sri Lankan rupee ended slightly weaker on Thursday as dollar demand from importers surpassed selling of the U.S. currency by exporters. Rupee forwards were active, with two-week forwards ending at 152.45/55 per dollar, compared with Wednesday's close of 152.40/60.

India's Jammu And Kashmir Bank Ltd has approved the sale of up to INR5bn non-convertible, unsecured Basel III-compliant Tier II notes, according to a regulatory disclosure.

State Bank of India approved the issuance of senior unsecured debt of up to US$1.5bn during current year and FY 2017-18, according to a regulatory disclosure.


Russia, CIS and Europe

Alfa Bank successfully placed a €400mn 3-year bond priced at par to yield 2.625%, slightly tighter than initial price thoughts of 2.75%. Alfa Bank, ING Wholesale Banking London, and UBS managed the sale.

In a surprise move, Russia has cut interest rates for the first time in seven months in a bid to ease credit conditions further, redoing the main benchmark interest rate by 25bp to 9.75%. CB officials said improving economic data including falling inflation, which is trending at 4.6%, bolstered appetite for a rate cut.

PKO Bank Hipoteczny, one of Poland's largest lenders, this week price a €500mn covered bond maturing in 2023. The notes carry a 0.625% coupon and priced at 99.972% to yield 0.63%. Landesbank Baden-Wuerttemberg (LBBW), DM PKO BP, Banco Santander, Societe Generale, and UniCredit managed the trade.


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