Moody’s lowered its outlook on Tunisia’s B2
rating to negative from stable on October 16,
citing intensifying pressures in an increasingly
adverse external environment with
diminishing buffers to sustain resilience. Fitch
has its B+ score on negative outlook too.
Moody’s calculated Tunisia’s net
INTERNATIONALûLIABILITYûPOSITIONûATû
ûOFû'$0û
INû ûSIGNIlCANTLYûWORSEûTHANûMOSTû3INGLEû"û
sovereigns, denoting sensitivity to delays in the
availability or higher cost of external funding.
“There are concerns around the external
account balance, but the progress on
reforms was the key driver for involving
ACCOUNTS vûSAIDûTHEûlRSTûLEADûh)NVESTORSûHADû
a lot of positive comments about reforms
which Tunisia has already undertaken.”
In September, the IMF approved the
payment of a US$245m loan tranche to Tunisia,
THEûlFTHûUNDERûITSûPROGRAMMEûWITHûTHEû.ORTHû
African country, paving the way for the bond.
The loan programme is tied to Tunis’s
pursuit of economic reforms aimed at
KEEPINGûITSûDElCITûUNDERûCONTROL
$EMANDûFORûTHEûNOTESûPEAKEDûATûAROUNDû
€1.25bn. Fund managers took 85%, banks
11%, insurers, pension funds and
supranationals 3%, and hedge funds 1%.
By geography, 38% went to the UK, 33% to
the US, 27% to Europe and 2% to others.
Citigroup, Deutsche Bank, JP Morgan and
Natixis were lead managers.
REGIONAL
HIGH-YIELD-LITE DOCS DOMINATE CIS
JUNK BONDS
Bonds with high-yield ratings sold by issuers
from the Commonwealth of Independent
States are dominated by high-yield-lite
covenant packages that feature fewer
investor protections, Moody’s said in a
report on Monday.
High-yield-lite documentation lack key
investor protection included in traditional
high-yield deals that limit issuers’ ability to
pay either dividends, incur debt or make
other payments out creditors’ reach.
Some 75% of bonds outstanding from CIS
issuers are high-yield-lite, according to the
REPORTû7HILEûTHEûRATIOûREACHESûûOFû$OUBLEû"û
rated bonds, it stands at 50% for Single B bonds.
Those levels are far higher than the rest of
the European high-yield market, where only
21% of bonds are high-yield-lite.
All CIS bonds with high-yield-lite covenants
lack a restricted payments covenant, because
the issuers are owned by individuals or states
who do not allow restrictions to their capacity
to pay dividends, Moody’s analysts said. This is
in contrast to the European market, where
investors require restrictions on dividend
payments by Single B names.
Of the 18 issuers in the study that are
owned by entrepreneurs, almost all paid a
dividend between 2014 and 2018.
Russian state-owned enterprises are another
key point, as the government targets a 50%
dividend policy of net income for state-owned
COMPANIES ûGIVENûTHATûTHEYûMAKEûAûSIGNIlCANTû
contribution to the sovereign budget. Changes
to this policy are unlikely given rising
geopolitical uncertainty and pressure on the
budget since sanctions imposed in 2014.
On the other hand, the majority of CIS
high-yield-lite bonds, at 52%, include a debt
covenant, with the protection more
prevalent in Single B bonds.
Almost all Single B issuers are owned by
entrepreneurs. They are more likely to
tolerate a debt covenant as they still allow
SIGNIlCANTûINCURRENCEûCAPACITY ûWHEREASû
they are most likely to resist restrictions on
ability to pay dividends.STRONGER PROTECTIONS FOR
FULL PACKAGES
CIS companies with full covenant packages
will continue to have stronger covenant
quality scores than bonds in the wider
European market, as CIS bonds have not
been subject to sponsor-driven weakening
of covenants, as have European bonds. Their
average score between 2015 and H1 2018
has been 2.76, compared with 3.60 for
European bonds. The worst possible score is
5.00.
Therefore, they have tighter debt
incurrence tests, smaller carve-outs for debt
incurrence and cash leakage, and receive
higher scores on subordination as notes lack
guarantors or are unsecured.
Changes-of-control covenants will remain
RAREûINû#)3ûBONDS ûREmECTINGûANûOWNERSHIPû
structure where 83% of bonds were issued by
entrepreneur-owned companies. Only 46%
of issuers included a change of control
protection, compared with 97% in the rest of
the European market.MIDDLE EAST
BAHRAIN
NOGA DUSTS OFF SPRING MANDATENOGAHOLDING is priming the pumps for a
fresh run at the primary, having resurrected
plans for an international bond offering.
The Bahrain state-owned company, which
plays a key role in the execution of the
government’s policy in the oil, gas and
petrochemical sectors, got close to putting
out initial pricing in early May for an
expected US$500m seven-year but took a
step back after being caught up in the wake
of choppy markets.
Bahrain, in particular, had been in the
LINEûOFûlREûOFûAûSTRENGTHENINGûDOLLAR
Noga has made a slight change to the
tenor this time around, readying itself to
print a six and/or 10-year offering. It began
meeting investors in London and the US on
October 26.
Fitch rates the issuer BB- with a stable
outlook.
BNP Paribas, Citigroup and JP Morgan are
joint global coordinators and Bank ABC, Gulf
International Bank, HSBC, National Bank of
Bahrain, Societe Generale and Standard
Chartered are joint lead managers.OMAN
MIDDLE EAST SOVEREIGN HOLDS FIRM
DESPITE VOLATILITYOMAN withstood a shaky market to cut 20bp
from IPTs on the way to selling a US$1.5bn
/CTOBERûûSUKUKûTRANSACTION ûITSûlRSTû
benchmark since a one-notch downgrade by
Moody’s in March.ALL INTL EMERGING MARKETS BONDS
BOOKRUNNERS: 1/1/2018 TO DATE
Europe/Africa
Managing No of Total Share
bank or group issues US$(m) (%)
1 Citigroup 35 10,426.06 13.7
2 JP Morgan 31 8,003.33 10.5
3 Deutsche Bank 21 7,060.53 9.2
4 VTB Capital 11 5,157.69 6.8
5 HSBC 15 4,314.49 5.7
6 Standard Chartered 9 4,004.97 5.2
7 SG 17 3,882.66 5.1
8 BNP Paribas 16 3,654.04 4.8
9 Goldman Sachs 8 3,369.31 4.4
10 Barclays 6 2,149.81 2.8
Total 83 76,333.88
Excluding equity-related debt.
Source: Refinitiv SDC code: L2ALL INTL EMERGING MARKETS BONDS
BOOKRUNNERS: 1/1/2018 TO DATE
Middle East
Managing No of Total Share
bank or group issues US$(m) (%)
1 Standard Chartered 49 10,611.57 13.7
2 HSBC 39 8,170.48 10.5
3 Citigroup 26 7,704.02 9.9
4 JP Morgan 18 5,029.19 6.5
5 Deutsche Bank 8 4,220.89 5.4
6 Barclays 18 4,055.05 5.2
7 Credit Suisse 8 2,672.16 3.4
8 Credit Agricole 11 2,140.99 2.8
9 BNP Paribas 11 2,108.93 2.7
10 Al Khaliji Commercial 2 2,082.76 2.7
Total 99 77,601.23
Excluding equity-related debt.
Source: Refinitiv SDC code: L5