Russian Railways sells notes; Burundi’s TDB plans marketing trip; Guatemala seeks issuance

By Christine Van Dusen

Atlanta, Feb. 27 – JSC Russian Railways priced notes – while Eastern and Southern African Trade and Development Bank (TDB) and Guatemala advanced deals – on a strong Monday for emerging markets assets, with Asian markets improving even as the Chinese government investigated whether speculation has distorted commodity futures prices.

“While developed markets have gone somewhat into a risk-off mode with concerns on the upcoming European elections and ahead of Trump’s speech in Congress tomorrow, the backdrop for emerging markets has remained strong, reflected by further inflows and the strong performance last week, notably in higher-yielding sovereign paper,” a London-based analyst said.

This came as China’s top economic planner investigated the commodities market. The country’s producer prices increased in January at a rate not seen since 2011, with mining products surging 31% year-over year and raw materials 13%.

“The Asian bond market increased slightly due to global positive market sentiment,” according to a report from Schildershoven Finance BV. “At first glance, news of the Chinese government investigation over the speculations in the commodity market will have a little impact on the market dynamics.

Also on Monday, some market-watchers were keeping an eye on Turkey, which could soon see its bonds improve, a trader said.

“The recent successful primary market deals and favorable backdrop for EM were key in calming investors’ concerns on Turkey’s external financing needs and refinancing risks,” he said. “Save a rapid turn in investor sentiment or outflows, we think that there is still room for Turkish credit to catch up further. With banks however having outperformed and trading tight versus the sovereign, we currently prefer exposure in the latter.”

Turkish banks tighten

Turkish banks, the trader said, have tightened 100 basis points since mid-January, versus 50 bps on the sovereign curve and 80 bps for corporates.

The sovereign’s 6% 2027s are particularly attractive, “given the recent underperformance of the belly,” he said.

Saudi Arabia eyed

Additionally, investors were watching Saudi Arabia while the king visited Malaysia and planned to travel to other Asian nations to strengthen ties and attract investment.

“In the meantime, a new head has been appointed to the kingdom’s debt management office, following the sudden departure of his predecessor, which was also seen as a reason for the postponement of the planned bond or sukuk sale in the first quarter,” the analyst said.

Agrokor suffers

Croatia-based Agrokor saw its bonds fall as a result of the company’s conflict with Serbian electricity providers.

Local media in Serbia last week reported that electricity had been turned off for 10 of the retail company’s stores in the country. Agrokor denied the claim. And then Moody’s Investors Service downgraded Agrokor’s rating.

“Its Serbian subsidiary has not paid for electricity since the beginning of the year. Management denied that the company’s Mercator unit faced troubles. Agrokor promised to pay the bill within a week,” Schildershoven said in a report. “Agrokor’s bonds substantially dropped due to high level of uncertainties among investors. Nonetheless, we expect a quick resolution of mentioned conflict. The main problem for the company is refinancing of the short-term debt.”

Russian Railways sells bonds

In its new deal, Russian Railways – via RZD Capital PLC – priced $500 million 4 3/8% loan-participation notes due March 1, 2024 at par to yield 4 3/8%, according to a company filing.

JPMorgan and VTB Capital were the bookrunners for the Regulation S deal.

The proceeds will be used to finance a loan to Russian Railways that will be used for general corporate purposes, including funding the company’s investment program and repaying indebtedness.

Russian Railways is a state-owned railway company based in Moscow.

Burundi’s TDB sets roadshow

Burundi-based lender TDB will set out on March 1 for a roadshow to market a dollar-denominated issue of notes due in five years, a market source said.

Commerzbank, MUFG and Standard Chartered Bank are the bookrunners for the Regulation S offering.

The roadshow will begin in Switzerland and travel to Germany, Singapore, London and Hong Kong before concluding on March 6 in London and the United Arab Emirates.

The company has also announced a tender offer for up to $100 million of its outstanding 6 3/8% notes due Dec. 6, 2018.

Guatemala plans deal

And Guatemala is looking to issue dollar-denominated and benchmark-sized notes, a market source said.

The proceeds will be used to fund infrastructure and pay off debt.

Other details were not immediately available on Monday.

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