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Emerging Market Credit Daily Roundup

Emerging Market Credit Daily Roundup

Oman to issue sukuk – ADB issued bonds – Taiwanese banks to issue maiden green bonds - The cost of insuring Brazil's sovereign debt against default skyrockets- Zambia’s economy to grow 4% – Russia plans to sell part of state shipping firm Sovcomflot - Eni SpA and Rosneft signed an agreement of cooperation

Middle East & Turkey

Oman has appointed banks to arrange a global fixed income investor call ahead of a potential dollar sukuk issuance, which would be the first public international sale of Islamic bonds by the Gulf state. Oman has mandated Al Izz Islamic Bank, Citi, Dubai Islamic Bank, Gulf International Bank, HSBC, JP Morgan and Standard Chartered Bank for the planned seven-year sukuk which is expected to raise around US$2bn.

Industrial & Commercial Bank of China Dubai’s branch issued international bonds for EUR500mn maturing in 2020 with a 3M EURIBOR + 0.6% coupon. Notes were sold at a price of 100%, with BNP Paribas, Citigroup, Credit Agricole CIB, ICBC and Standard Chartered Bank acting as organizers.

The IMF warned Saudi Arabia on Wednesday not to tighten fiscal policy too fast, saying excessive cuts to the government's budget deficit could hamper the economy. Tim Callen, head of an IMF team meeting with Saudi officials, said Riyadh's goal of balancing its budget was appropriate, but added that the target of balancing the budget, however, does not need to be met in 2019 as set out in the Fiscal Balance Program given Saudi Arabia’s strong financial asset position and its low debt. "A more gradual fiscal consolidation to achieve budget balance a few years later would reduce the effects on growth in the near term while still preserving fiscal buffers to help manage future risks," he was quoted as saying by Reuters.

In a sign of continued GCC banking sector consolidation, Kuwait Finance House KSCP is reportedly considering buying Ahli United Bank BSC’s Kuwaiti operations as it seeks to expand in the Persian Gulf state, according to sources quoted by Bloomberg. KFH, as the lender is known, is working with a financial adviser on the talks, the people said, asking not to be identified because the information is private. Discussions between the two banks are informal and Bahrain’s Ahli United isn’t running a formal sale process, the people said. There is no guarantee that a deal will take place and final agreements haven’t been reached with any of the parties, they said.

 

Africa

Zambia's economy will grow by 4% this year from around 3.2% last year supported by improved agricultural output, and higher electricity generation and mining production, according to senior official statements. In the annual national budget for this year, the government had targeted a real GDP growth of at least 3.4%.

South African fund manager Mergence Group has expanded to the commodity finance market after acquiring a majority stake in Riparian, the largest independent trade commodity finance firm in the country. According to Global Trade Review, through the acquisition, the company aims to address the growing financing needs of commodity firms in the Southern African region.

 

Americas

The cost of insuring Brazil's sovereign debt against default hit the highest level since January and the country's dollar-bonds fell across the curve after reports implicated President Michel Temer in a corruption scandal. Five-year credit default swaps jumped 68bps to 274 bps and Brazil's dollar bond maturing 2045 fell 4.250 cents to 86.425 cents - their lowest level since March.

The bonds of Brazilian energy company, Petroleo Brasileiro SA dropped the most in six months amid the new political crisis in Latin’s America’s largest economy. The state-controlled company’s EUR800mn notes due in January 2025 led the slump, falling 4.5 cents on the euro to 102 cents, the biggest decline since November.

The Brazilian government expects to collect between BRL2bn and BRL3bn (US$637mn to US$955mn) this year from a renegotiation of corporate debts owed to federal agencies and authorities, two government sources told Reuters on Wednesday. President Michel Temer is expected to issue the presidential decree later this week to start renegotiating the fees and fines following recent efforts aimed at tax debts.

Mexico's Central Bank is expected to keep its benchmark interest rate MXCBIR=ECI unchanged after Thursday after five consecutive hikes, on the back of the peso's recent rally and in spite of above-target inflation.

Puerto Rico's main creditors, meeting before a U.S. bankruptcy judge in the largest public finance restructuring case in history, are prepared to continue mediation settlement talks to resolve the island's unpayable US$70bn debt bill. In the first hearing since the U.S. commonwealth filed for bankruptcy on May 3, a lawyer for Puerto Rico's federal financial oversight board told U.S. District Court Judge Laura Taylor Swain that the two main creditor groups expressed interest in maintaining the discussions while the case proceeds.

 

Asia

Asian Development Bank (ADB) issued international bonds for INR3bn maturing in 2021 with a 6% coupon. Notes were sold at a price of 100.011%. JP Morgan and TD Securities managed the deal.

Four Taiwanese banks will begin issuing green bonds, the Taipei Exchange (TPEx) announced. CTBC Bank, Sun Commercial Bank, KGI Bank and Bank SinoPac – will list Taiwan's first green bonds, totalling NT$5.17bn (US$171mn). The green bond initiative is aimed at showing corporate responsibility with regard to environmental protection, with the proceeds going toward funding environmentally friendly projects.

India has finalised tax rates that will apply to different goods and services under a new sales tax which New Delhi aims to introduce from July 1. A panel comprising federal and state finance ministers fixed the rates for over 1200 items under the Goods and Services tax, amid demand by some states to keep essential items under the lower tax category.

 

Russia, CIS and Europe

Russia plans to sell part of state shipping firm Sovcomflot next month, hoping to draw in a wide range of small-stake investors rather than a strategic buyer who could threaten Moscow's control of the group, banking and industry sources told Reuters. The current era of low tanker market prices is far from the ideal time for Sovcomflot, operates the world's second largest fleet of oil tankers, to raise revenue with a share offer, as freight rates were at their highs in 2015.

Italy’s oil major Eni SpA and Russia’s oil giant Rosneft signed an agreement to cooperate in oil and gas exploration and production, as well as in oil refining, petrochemicals, trading, and marketing, both inside and outside Russia, the companies announced in a statement. The agreement extends previous cooperation deals between Eni and Rosneft for joint exploration in the Russian Barents Sea and Black Sea, as well bringing the sides closer on other development opportunities, including in the giant Zohr gas field offshore Egypt which Eni discovered in 2015.

Russia’s State Transport Leasing Company (STLC) is set to hold a road show of dollar-denominated Eurobonds starting from Friday, with plans to place Eurobonds for five to seven years depending on market conditions, Interfax reported Thursday. Meetings with investors will take place in Moscow, London and Switzerland, and J.P. Morgan, Renaissance Capital, Alfa Capital Markets, Gazprombank, SG CIB, and VTB Capital will act as organizers.

 

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Bonds & Loans is a trusted provider of news, analysis, and commentary that helps illuminate the most significant issues, events and trends impacting the global emerging credit markets.

 

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