6 International Financing Review September 8 2018Top news
Akbank, Eximbank increase loan pricing
n Loans Turkish bank borrowers pay up
BY TESSA WALSHTurkey’s AKBANK and TURK
EXIMBANK have increased pricing
on two syndicated loans they are
attempting to agree with
international lenders, in order to
encourage them to join the
deals.
The two loans were launched
in early August, but were put on
hold as international lenders
assessed the impact of a 40%
depreciation of the lira on
Turkey’s banking sector.
Pricing has been increased on
a US$930m loan for Akbank anda US$350m loan for Turk
Eximbank.
“Pricing on Akbank’s loan
has increased following
discussions with lead banks
and feedback from the wider
banking group,” a senior
banker said.
Turkey’s banks have to
refinance US$6.4bn of
syndicated loans before the end
of the year, as the country’s
firms face an uphill struggle to
repay foreign currency debt.
Fitch cut its outlook for
economic growth in Turkey on
Tuesday and warned of“significant and widespread
downside risks” as the currency
crisis hits economic activity.
Pricing on Akbank’s US$930m
loan has been increased to
200bp over Libor for dollar-
denominated tranches and
190bp for euro-denominated
tranches on a one-year loan, and
to 290bp for dollars and 240bp
for euros on a two-year loan.
A further pricing increase of
25bp is also included if Akbank
is rated B/B2 or lower. It is
currently rated BB-/Ba3.
Bank of America Merrill Lynch,
ICBC and Standard Chartered areleading the deal, which has to be
refinanced before the existing
loan matures on September 27.
Akbank was not immediately
available for comment.
This is the second price
increase for the loan, which was
priced at around 150bp-160bp
when it was launched in early
August, up from 130bp on a
US$1.24bn-equivalent deal that
closed in March.BALANCING ACT
Akbank’s new loan also includes
a provision that states that no
lender can hold more than 8.5%Torrid September forecast for EM
n Emerging Markets Further market dislocations expected as risks grow and currencies slide
BY SUDIP ROY, FRANCES YOONThe brutal sell-off in the
currencies of certain emerging
markets paused at the end of last
week, but analysts believe the
respite will be short-lived as
heightened risks continue to
loom over parts of the asset
class.
While the Argentine peso and
Turkish lira have grabbed the
headlines, other countries such
as SOUTH AFRICA, INDONESIA, BRAZIL
and INDIA are increasingly seeing
their currencies come under
pressure.
A stronger US dollar and
tighter funding conditions are
putting the spotlight on
countries that have significant
current account deficits or poor
economic stories or political
risks - ARGENTINA, unfortunately,
combines all three.
Higher US dollar rates - six-
month Libor has jumped 70bp
since the beginning of the year
to 2.54% - are leading to a
reversal of the carry trade that
propelled emerging markets
during the QE years.
Stress in the FX markets has
spilt over to the bond markets,
with local currency debt inparticular badly affected. The
total return on the main local
currency index, JP Morgan’s GBI
EM Global Diversified, was
nearly -10.5% this year as of early
September.
What’s worrying is that
analysts don’t see a turn in
sentiment anytime soon. “We
believe September will probably
bring larger bearish dislocations
in EM,” said analysts at
Citigroup.
Although valuations are
becoming increasingly
attractive, with an average real
yield of 3% in local currency
debt, prices have yet to reach a
floor as the market focuses on
short-term idiosyncratic risks -
from President Trump’s tweets
on all manner of subjects to next
month’s presidential election in
Brazil.
“For the asset class as a whole,
the question is whether [year-to-
date] underperformance of most
EM dedicated investors could
trigger fund redemptions before
equilibrium is restored in the
market,” added Citigroup.
What’s making life especially
tough for investors is that the
list of things to worry about is
growing.Last week, for example, it was
South Africa’s turn to become
the market’s whipping boy.
While the rand has been falling
against the US dollar for several
weeks, shocking economic data
pushed the currency to a record
low of 15.6919, signifying a 21%
depreciation this year.“The arrival of yet another
flashpoint is serving to
cement the broader negative
mood, which is leading people
to sell first, ask questions
later,” said a trader after
data showed that South
Africa’s economy has entered
recession.
“The issue with the country is
that everyone pinned their
hopes on one man, [President]
Ramaphosa - they gotRamaphoria,” said one portfolio
manager. “South Africa’s
problems are structural, so these
are not going to be solved
overnight and certainly not by
one man.”MEANWHILE IN INDONESIA
Other countries are also causing
concern - even those that have
better economic fundamentals
than the likes of South Africa,
and especially Turkey and
Argentina.
Indonesia’s rupiah fell to
14,940 to the dollar last Tuesday,
a level not seen since July 1998,
when the Asian financial crisis
was in full swing.
The yield on the 10-year
rupiah government bond
jumped 50bp in five days to
8.58%, the highest since January
2016.
Indonesia’s open-market
policy, with over 40% of rupiah
government bonds in foreign
hands, often makes for volatile
currency trading in times of
global turmoil, but there are
signs that hard-currency
investors are also pulling back.
Indonesia’s 3.5% US dollar
sovereign bonds due 2028 posted
their worst week against“The arrival of yet
another flashpoint
is serving to
cement the broader
negative mood,
which is leading
people to sell first,
ask questions
later”4 Top news 2250 p4-11.indd 6 07/09/2018 18:27: