Etihad advances deal; Turkey sees buyers; Poland under pressure; Hungary rating affirmed

By Christine Van Dusen

Atlanta, Nov. 22 – Abu Dhabi’s Etihad Airways advanced a new deal on an otherwise quiet Tuesday for emerging markets assets, as investors awaited the Thanksgiving holiday in the United States and continued to assess the likely impacts of Donald Trump’s presidential win.

Bonds from Turkey were off the tights, with local buying and good two-way activity.

After Trump’s win, “the once-loved emerging markets are becoming the out-of-favor risk with EM tourists looking for the doors all at once,” a London-based analyst said. “Most investors seemed to be in the same camp, trying to keep a cautious approach on risk and light on duration without much conviction on where they see rates going to. Turkey, in particular, remains under pressure due to the current political situation and its reliance on external financing, making it highly sensitivity to changes in the macro environment.”

Though Turkey “has often surprised markets with it robustness during times of difficult macro environments,” it is struggling because the political picture at home is volatile, he said.

“Early elections remain on the table, although government officials continue to stress that there will be no such event,” he said. “Locals and investors have a more mixed view on this.”

Additionally, confidence has “taken a hit since the previous coup attempt, with business spending and consumer spending being held back and credit growth also slowing, which had been a key contributor to growth, although seen as an unsustainable one at that,” he said.

Blue chip corporates from Turkey remain sound, though, with demand holding up well, he said.

“The outlook for supply in this sector remains tight, as corporates who could come to the market are sufficiently serviced by the locals banks, ECA funding, etc.,” he said.

Poland, Hungary in focus

Looking to Poland, the sovereign cut the retirement age, which is viewed as credit-negative, according to a report from Schildershoven Finance BV.

“Investors may negatively react to the government decision, which may worsen the Polish budget deficit and therefore affect the sovereign debt burden,” the report said.

From Hungary, the sovereign was affirmed by Fitch Ratings.

“According to the report, Hungary’s ratings reflect membership of the European Union, strong governance indicators and high GDP per capita,” the report said. “Current account surpluses have helped to reduce the external debt in recent years.”

But the rating is constrained by the sovereign’s high level of government debt, the report said.

“We do not expect any market reaction to the Hungary’s rating affirmation by Fitch,” the report said. “Investors will focus on the central bank meeting.”

PDVSA delays payment

From Latin America, Venezuela-based PDVSA faced an increased likelihood of default, after delaying $404 million of bond payments.

This came as the company faced cash flow problems as a result of the current oil price environment, Schildershoven said.

“It has a 30-day grace period before being considered in default,” Schildershoven said. “We confirm our recommendation for investors to avoid its bonds due to the high level of risk.”

Etihad to issue notes

For its new deal, Abu Dhabi’s Etihad Airways – via Unity 1 Sukuk Ltd. – is planning to price a benchmark-sized issue of dollar-denominated notes due in November of 2021, according to a company announcement.

HSBC, JPMorgan, National Bank of Abu Dhabi, Abu Dhabi Islamic Bank, Dubai Islamic Bank and First Gulf Bank are the bookrunners for the Islamic bonds.

Etihad is an airline in the United Arab Emirates.

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