CEE monthly bond wrap: 2018 off to a strong start in CEE

CEE monthly bond wrap: 2018 off to a strong start in CEE
By Ben Aris in Berlin February 14, 2018

The bond markets of Central and Eastern Europe (CEE) made a robust start to the new year with $5.8bn of issues in Central Europe, well ahead of the $0.39bn issues in January 2017. Russia also made a good start with $2.2bn of bond issues, on a par with the $2.3bn it issued in the same month a year earlier.

The biggest bond issued in CEE was a Turkish sovereign dollar-denominated bond worth $2bn that matures at the end of January 2030 and bears a yield of 5.75%. The lead managers of the placement were Citigroup, Deutsche Bank and HSBC. Some 35% of the bonds were sold to investors in the UK, 25% to investors in the US, 15% to investors in other European countries and 15% to buyers in Turkey.

Macedonia also got a seven year €500mn sovereign bond away to strong demand that drove the yield down to a historic all time low of 2.75%, as bne IntelliNews reported.

The issue will be an encouraging sign for other sovereign issuers in the region as 2017 was marked by several exotic bond issues that were very well received by the market – with issues by Ukraine, Belarus and Turkmenistan standing out.

This is the sixth Eurobond issue placed so far by Macedonia’s finance ministry with the lowest interest rate so far. For comparison, the interest rates on the previously issued five Eurobonds ranged between 3.975% and 9.875%.

“This is historically the lowest interest rate of the Eurobonds issued so far by the finance ministry, reflecting the extremely high confidence among international investors,” the ministry said in a statement.

All the other major commercial CEE issuers were Turkish including: Petkim Petrokimya Holding, which produces and sells petrochemical products in Turkey and internationally and issued a $500mn five year bond; investment bank Turkiye Sinai Kalkinma Bankasi, which specialises in industrial investments, energy and resource efficiency, environmental protection investments, renewable energy, tourism, education and health investments; and Vakifbank, the fifth largest bank in the country.

 

CEE Issue

Currency

Volume (m.)

Lead Managers

Turkiye Sinai Kalkinma Bankasi, 5.5% 16jan2023, USD

USD

350

Commerzbank, ING, SMBC Nikko Capital and others

Macedonia, 2.75% 18jan2025, EUR

EUR

500

Citigroup, Deutsche Bank, Erste Group

Petkim Petrokimya Holding, 5.875% 26jan2023, USD

USD

500

Citi, Goldman Sachs, JP Morgan, Societe Generale, VTB Capital

Vakifbank, 5.75% 30jan2023, USD

USD

650

Emirates NBD, First Abu Dhabi Bank, UniCredit and others

Turkey, 5.125% 17feb2028, USD

USD

2000

Citigroup, Deutsche Bank, HSBC

 

The Russian issuers were all commercial as companies tap the market while the benign conditions from last year spill over into the new one.

Polyus Gold issued two bonds, a three-year $250mn bond and perpetual $500mn bond. Aluminium producer Rusal was also in the market with a $500mn bond, together with fertiliser producer Phosagro, and Alfa Bank, one of the top three largest commercial banks in Russia.

PhosAgro, one of the world’s leading vertically integrated phosphate-based fertiliser producers, used the money raised from its bond to retire its debut 5-year, $500mn Eurobond issued in February 2013 with a 4.204% coupon. The redemption was financed by the company’s new 5.25-year, $500mn Eurobond placed in January with a coupon of 3.949%, “which is among the lowest rates achieved by Russian issuers”, the company said.

PhosAgro CEO Andrey Guryev commented: “This placement represents a new benchmark for the company, enabling us to lower the average interest rate and significantly improve the structure of our debt portfolio. We saw strong demand from international investors during the deal, with over 90% of the orders coming from American and European investors. We were happy to see major international funds and banks participating in this placement.”

Russia Issue

Currency

Volume (m.)

Lead Managers

Polyus, 1% 26jan2021, USD (Conv.)

USD

250

Deutsche Bank, JP Morgan, Sberbank CIB

Phosagro, 3.949% 24apr2023, USD

USD

500

BofAML, Citi, JP Morgan, RBI Group and others

Polyus, 4.7% 29jan2024, USD

USD

500

Gazprombank, JP Morgan, Renaissance Capital, Sberbank CIB, VTB Capital

Alfa Bank, 6.95% perp., USD

USD

500

Alfa Bank, UBS

RUSAL Plc, 4.85% 1feb2023, USD

USD

500

Credit Bank of Moscow, Sberbank CIB, Sovcombank, VTB Capital and others

 

All-in-all the outlook for emerging markets (EM) bond markets this year is good as the CEE region booms and the CIS is also growing, albeit at more modest rates.


 

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