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The Daily Roundup

Saudi Aramco could be valued over US$1tn in the IPO – Europe’s highest court has upheld EU sanctions against Rosneft - Akbank signed US$1.2bn syndicated loan – NBAD priced first Middle East green bond, sized US$587mn – The rand plummets amid concerns South Africa's Finance Minister Pravin Gordhan could be sacked - Odebrecht Óleo & Gás SA could seek an out-of-court debt settlement with creditors

Mar 28, 2017 // 4:27PM

Middle East & Turkey

Members of the Board of Executive Directors of the Islamic Development Bank, IsDB, approved the allocation of US$714.7mn worth of financing for new development projects in member countries. Among the several strategic financing agreements included: US$328.5mn for reconstruction of Atyrau project in Kazakhstan; US$300mn for phase two of the construction of housing projects in Uzbekistan and a further US$86mn for a port expansion project in Lebanon.

The International Finance Corporation (IFC) has lent US$100mn to Karot hydropower – one of the largest renewables projects in Pakistan. The project sponsor is China Three Gorges Corporation (CTGC), which is completing extensive power work in Pakistan as part of the China Pakistan Economic Corridor (CEPC).

Saudi Aramco could have a market value of more than US$1tn, Sanford C. Bernstein & Co. estimates, reported by Bloomberg. This comes after the government slashed the oil producer’s tax burden to attract investors ahead of what may be the world’s biggest initial public offering. The tax cut would increase Aramco’s revenue almost a 300%, putting it at the same level of its western peers.

Qatar Holding LLC is set to sell as much as US$900mn in shares of Banco Santander Brazilian unit. The group is offering 80 million units that are composed of one common share and one preferred share in Banco Santander (Brasil SA) and will be sold in an international sale. Credit Suisse and Bank of America will act as underwriters of the deal, while units would be offered in the form of American depositary shares.

The outlook for GCC insurers is strong as a number of planned medical insurance privatisation schemes and ongoing government infrastructure spending look likely to boost insurables, a report from S&P suggests. "The four largest insurance markets in the GCC are likely to remain profitable in 2017. However, there is a risk that, in addition to further reserving requirements following the adoption of new regulations in the UAE, the enforcement of mandatory insurance cover in Saudi Arabia, and the privatization of medical insurance in Qatar and Kuwait, could strain insurers' technical performance, as they lack sufficient data to price the new business appropriately," the rating agency said.

Turkey's Akbank has signed a US$1.2bn syndicated loan, according to a statement from Emirates NBD Capital, the arranging bank. The loan includes a US$404.5mn facility and a €738mn tranche. Bank of America Merrill Lynch, Emirates NBD Capital and ICBC Turkey Yatırım Menkul Değerler arranged the deal.

The National Bank of Abu Dhabi (NBAD) priced the Middle East's first green bond this week, placing US$587mn in notes maturing 2022. The bond priced at 99.995% to yield 3.02%. Bank of America Merrill Lynch, Citigroup, Credit Agricole CIB, HSBC, Mitsubishi UFJ Financial Group, and NBAD managed the sale.

The price of external borrowing for Turkish lenders has risen between 30-40bp since Turkey's sovereign debt was cut to junk, Isbank General Manager Adnan Bali told reporters last week. The rating downgrade was followed by a raft of corporate outlook revisions.

Africa

The rand spiked from ZAR12.7 per US dollar to as high as ZAR13.03 on the back of rising concerns that South Africa's Finance Minister Pravin Gordhan could be sacked. Gordhan was in London meeting with investors and rating agencies when he was called home just one day after landing, apparently for no reason. When asked about his potential removal upon landing in Johannesberg, Gordhan was quoted by Reuters as saying "let's wait and see."

South Africa's President Jacob Zuma said this week that he does not plan to create a commission to investigate the banking sector after it drew criticism from MPs for failing to adopt the country's ambitious wealth redistribution policies fast enough. The country has adopted affirmative action policies aimed at improving financial inclusion.

The Nigerian government will target a sum of about US$300mn for the country's inaugural diaspora bond, it announced this week. The country is on track to sell the diaspora bond by the end of the second quarter, and initially held off because it was finalising its Eurobond sale earlier this year.

Kenya's Central Bank left the benchmark rate unchanged at 10%, in line with expectations, stating that "overall inflation is expected to remain outside the Government target range in the near term due to the elevated food prices, even as demand pressures remain subdued." Last year the Central Bank cut its rate by 150bp amid uncertainties about impact of the government-imposed caps on lending and the effectiveness of current monetary policy.

Latin America

Mexican trade balance at the end of February stood at surplus US$684mn, in stark contrast with consensus deficit of US$350mn. Higher oil prices have helped exports to post 7.3% year on year gain, while manufacturing export growth was more moderate at 5.5% marking weakened demand from the US, according to figures from Argus Capital Management.

JBS Amazon beef plants to resume operations after suspension, according to local press reports. JBS' bonds retraced around 50% of the down-move related to the recent controversy, while Marfrig and Minerva's credits have already recouped losses. BRF's asset prices are still lagging, however.

Odebrecht Óleo & Gás SA could seek an out-of-court reorganization with creditors to speed up the restructuring of US$5bn in debts Reuters reported Monday citing two sources familiar with the matter. According to the sources, an out-of-court workout would help the company bind minority creditors to a restructuring that is accepted by a majority of banks, bondholders and suppliers, as the option of filing for bankruptcy remains off the table.

Panamanian trade bank Bladex increased its latest facility to US$193mn after 18 banks agreed to participate in the 4-year loan syndicate.

Asia

The China-led Asian Infrastructure Investment Bank (AIIB) has given two of its biggest members, Brazil and South Africa, an extra 12 months to formally join the institution, after they missed an original deadline that expired at the end of last year. The two countries were among the highest-profile members to join the multilateral lender, which was established by Beijing last year, and since then has lent around US$2bn to 12 projects, mainly in the areas of energy and transport.

The Export-Import Bank (Eximbank) of India is looking to increase Ghana’s line of credit from the present US$400mn to cover a range of new development projects, according to an interview with the managing director of the bank in the Daily Graphic. The bank has already provided an additional US$500mn loan to cover the rehabilitation of a 84 km-long railway line linking the Tema port to the eastern part of the country.

Chinese datacentre giant Tencent Holdings has inked a US$4.65bn loan deal with a number of international and local lenders, it revealed this week. The loan package includes a US$2.79bn term loan and a US$1.86bn revolving credit facility. The transaction was led by Citigroup. The latest deal brings the total amount raised by the company through syndicated loans to US$7.94bn.

PT Palapa Timur Telematika (PTT) secured an IDR4tn (approx. US$300mn) loan from PT Bank Negara Indonesia (Persero) Tbk (BBNI) and a syndicate of four other lenders - ICBC Indonesia, Bank Papua, Bank Malukumalut and Bank Sulsebar - for the Palapa Ring Fiber Optic Network Project of East Package, the company said in a statement this week.

Bank of India has raised Rs1,000 crore (approx. US$153mn) in fresh Basel III-compliant Tier II notes, it announced this week. The notes will pay an interest rate of 8% per anum, the company said in a regulatory disclosure.

The United Bank of India is looking to issue fresh unsecured subordinated Basel III Tier I notes, according to a filing with regulators. The bank will look to raise up to Rs200 crore (approx. US$30.7mn) in additional Tier I capital issued as a perpetual private placement.

India's Corporation Bank will look to raise up to Rs5,000 crore (approx. US$768mn) in Basel III-compliant Additional Tier 1 perpetual notes, the bank said.

Chinese chip manufacturer Tsinghua Unigroup Ltd said this week it has signed two financing deals totalling roughly CNY150bn (approx. US$21.8bn). The package includes a CNY100bn 5-year loan from the China Development Bank and a CNY50bn loan from China's Integrated Circuit Industry Investment Fund.

Industrial profits in China rose 31.5% in January and February according to the National Bureau of Statistics, the fastest pace on record since 2011.

Korean lender KEB Hana Bank hit the international markets this week with a benchmark-sized trade. The US$500mn notes maturing in 2020 pay a 3MLIBOR+0.725% coupon and priced at par. Bank of America Merrill Lynch, BNP Paribas, Commerzbank, HSBC, ING Wholesale Banking London, KEB Hana Bank, and Societe Generale managed the trade.

Malaysia’s inflation reached 4.5% an eight-year high in February, the Central Bank reported. Higher fuel costs pushed inflation, even though there are no signs that the price hike has spread to the rest of the economy. Bank Negara Malaysia announced that inflation would probably average 3% to 4% this year, up from 2.1% in 2016.

Russia, CIS & Europe

Russia's Deputy Finance Minister Sergei Storchak said China was not yet ready to participate in a sovereign yuan-denominated Eurobond, according to local press reports. Speaking to press this week, Storchak also said the country was in no rush to sell fresh Eurobonds in a follow-up to its surprise placement last year.

Russian gas giant Gazprom is planning a 7-year GPB-denominated Eurobond, which is expected to price as early as Tuesday, according to reports. The company is currently roadshowing in the UK ahead of the planned bond. Deutsche Bank, Gazprombank, J.P. Morgan and VTB Capital are leading the transaction.

Moody’s increased its forecast for real economic growth for Poland in 2017 to 3.2% from 2.9% following an improvement in the macro outlook. According to latest figures seasonally-adjusted unemployment figures have hit a historic low of 7.7%, which together with a healthy rise in wages point to an increase in private consumption. According to Deputy Prime Minister Mateusz Morawiecki, Poland's economic growth may exceed 3.6% in 2017. Meanwhile, the zloty rallied more than 3% against the euro so far this year, and on Monday hit a high of 4.2577 per euro, its strongest level since August.

Europe’s highest court has upheld EU sanctions against the Russian state-controlled oil giant Rosneft over its role over Russia’s interference in Ukraine. In a ruling on Tuesday, the European Court of Justice said sanctions imposed on Rosneft after Russia’s illegal annexation in 2014 of Crimea were “valid.”, reasserting the ECJ’s right of jurisdiction over Europe’s common foreign and security policy, after Rosneft challenged the principle in the British courts. The latest ruling could potentially undermine Rosneft and other Russian quasi-state corporates’ ability to participate in global capital markets.

Russian Central Bank governor Elvira Nabiullina noted on Tuesday that there are grounds to increase lending in Russia, adding that that the ongoing clean-up of the Russian banking system remains a priority.

The Central Bank of the Kyrgyz Republic left its benchmark discount rate steady at 5%, saying this should support economic growth as there are no external or internal risks to inflation, which is expected to be close to its target of 5-7% by the end of this year.

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