CEE Monthly Bond Wrap: CE bond issues pick up momentum in November

CEE Monthly Bond Wrap: CE bond issues pick up momentum in November
CEE issues four-times more bonds in November than a year ago
By bne IntelliNews December 12, 2017

There was a flurry of bond issues in Central Europe in November, with a total of seven new bonds that raised $3.4bn, or four times more than in the same month a year earlier. Eastern Europe was more subdued with a raft of nine bonds but all smaller sizes, to raise a total of $2.2bn in the month, only slightly more than a year earlier.

The biggest issue in Central Europe was one by the Croatian government that raised €1.275bn, with a bond due to mature in January 2030 that carries a 2.75% coupon rate – Croatia's most favourable terms ever.

The funds will be used for early repayment and refinancing of the debt of state-owned companies in the transport sector, Hrvatske ceste (HC), Hrvatske autoceste (HAC), and Rijeka Zagreb motorway (ARZ). The debt of the three companies amounts to €5.2bn, or more than 13.5% of public debt. The government is actively taking advantage of the benign market conditions to restructure its debt portfolio and has saved HRK800mn (€106.1mn) this year, Finance Minister Zdravko Maric said on December 4.

Prime Minister Andrej Plenkovic called the issue a huge success. It comes in the wake of several emerging Europe issues, including a $1.4bn issue from Belarus and a $3bn Ukrainian bond, which have been met with enthusiasm by the markets.

The other big issue from Central Europe was from NE Property Cooperatief UA, which is based in Amsterdam and runs a property finance REIT business in emerging Europe. The firm issued a €500mn bond that matures in 2024 and carries a coupon of 1.75% to fund its lending activity.

The two biggest issues in Eastern Europe were by Russian state-owned gas giant Gazprom and gold miner Petropavlovsk, which is listed on the London Stock Exchange (LSE).

Gazprom issued a €750mn bond that matures in November 2024 with a coupon rate of 8.125%, while Petropavlovsk issued a $500mn bond that matures in November 2022 and has a coupon rate of 8.125%.

The other significant issue from the Commonwealth of Independent States (CIS) was a $780mn bond issued by the Kazakh state owned railway company Kazakhstan Temir Zholy  that matures in November 2027 and carries a coupon rate of 4.85% thanks to its government ownership.

All-in-all the issues from Eastern Europe underwhelmed. Despite the good market conditions the total volume of bonds were still down on last year and the end of the season is already visible.

However, the outlook for next year remains good with a full pipeline of issues on the cards. With one month to go, this year has seen more issues than 2016 – CEE $49.8bn in 2017 as of December 1 vs 441.7bn a year earlier, and CIS $44bn vs $22.2bn respectively – in a trend that is likely to continue, albeit at a slower pace.