Islamic Development eyes $1 billion sukuk; Jamaica to reopen notes; Namibia underperforms

By Rebecca Melvin

New York, Aug. 14 – Saudi Arabia’s Islamic Development Bank was heard on Monday to have mandated banks for a $1 billion five-year note offering, representing the Jeddah-based lender’s first issuance since the end of last year when it priced $1.25 billion of five-year notes with a 2.263% yield, according to market sources.

The lender was said to have mandated Standard Chartered Bank, HSBC, Natixis and Gulf International Bank to underwrite the deal. Timing of the deal was unclear, a market source said.

Jordan was also rumored to have approached the market about a possible notes deal, the source said.

Jamaica is planning a tap of its 6¾% notes due in 2028 and its 7 7/8% notes 2045. No timing or deal size was immediately available. The original issues were priced on July 28, 2015; the 6¾% notes have $1.35 billion outstanding – they priced at 99.96 to yield 6¾% – and the 7 7/8% notes have $650 million outstanding.

In euro-denominated deals, Lithuania auctioned €25 million of zero-coupon government securities due March 29, 2020 on Monday. The total amount of competitive and non-competitive bids was €55.61 million.

In local currencies, Singapore Airlines Ltd. priced S$700 million of 10-year notes at par to yield 3.13%.

DBS Bank Ltd., Standard Chartered Bank and Hongkong and Shanghai Banking Corp. Ltd. were the joint lead managers of the flag carrier’s notes, which were issued under a S$5 billion multicurrency medium-term note program.

A subsidiary of Singapore’s Fraser and Neave, Ltd. priced S$200 million of 2.8% five-year notes guaranteed by the parent beverage conglomerate. The notes were issued under the company’s S$2 billion multicurrency debt issuance program.

The Philippines’ Rizal Commercial Banking Corp. sold PHP 2,502,000,000 of 3¾% long-term negotiable certificates of deposit due February 2023.

In established issues, Zambia’s sovereign debt improved on Monday as progress in mediation between the government and the opposition cheered investors. A conciliatory tone is viewed as the likely path to reforms before the 2021 elections, CEEMEA credit strategist Trieu Pham wrote in a note on Monday.

Much of African sovereign debt was positive on Monday with a notable exception being the Republic of Namibia, which saw its sovereign credit widen.

Namibia appeared to suffer from Moody’s Investors Service’s sovereign rating downgrade to Ba1 from Baa3 with a negative outlook maintained.

Kenya’s 5 7/8% bonds due 2019 were better in terms of spread by 15 basis points on Monday and better by 78 bps in the last month. They traded at a dollar price of 103 bid, 104 offered.

The final results of last week’s presidential elections in Kenya gave incumbent Uhuru Kenyatta a solid victory, 55% to 45%, over his main opponent Raila Odinga. But Odinga still alleges election rigging and called for a national work strike on Monday that went largely unheeded by workers in Nairobi, according to Reuters report. Nevertheless, at least eight people died in street protests over the weekend, and some counts put the number of people who died higher at 26 or as many as 100. Still, Kenya’s bonds were tighter on average by about 5 bps on Monday, in line with other African sovereigns.

In Latin America, Argentina’s financial markets strengthened following results of that nation’s primary legislative elections on Sunday, which revealed better-than-expected support for the current Argentine President Mauricio Macri and his pro-business economic policies. The results also dealt a blow to former President Cristina Kirchner, who has been considering a bid for re-election. Kirchner held the office from 2007 to 2015 during which time she nationalized public pension funds and established currency controls, and the country defaulted on sovereign debt in 2014.

Argentina’s 7 1/8% bonds due 2117 jumped three points to 95½ bid, 96½ offered on Monday, which was up from 92½ bid, 93.2 on Friday, according to a market source.

Jamaica to reopen notes

Jamaica’s tap of its 6¾% notes due in 2028 and its 7 7/8% notes 2045 is being led by BofA Merrill Lynch and Citigroup.

The Securities and Exchange Commission-registered and Regulation S notes are expected to be listed on the Official List of the Luxembourg Stock Exchange and to trade on the Euro MTF Market of that exchange.

Proceeds will be used to fund a tender offer of its 8% amortizing notes due 2019, 8½% amortizing notes due 2021, 11 5/8 % notes due 2022 and 9¼% notes due 2025, with any remaining proceeds used for general purposes of the government, including financial investment and refinancing, repurchase or retiring of domestic and external indebtedness and other budgetary purposes.

Jamaica is dependent on oil imports to satisfy domestic energy consumption needs and received oil from Venezuela under the PetroCaribe Agreement established in 2005. Under this agreement the government of Venezuela makes available to Jamaica a portion of the value of Jamaica’s purchases of oil as a concessionary loan facility, the terms of which are determined by the prevailing price per barrel of oil internationally.

Currently Jamaica is not receiving any crude imports under the agreement. But it cannot guarantee the agreement will not be terminated or disrupted by the current political situation in Venezuela. In addition, a disruption of oil supplies or a significant increase in international oil prices may have a material adverse effect on the Jamaican economy and Jamaica’s ability to service its debt, including the notes.

Zambia credit better

Zambia’s 5 3/8% notes due 2022 were 94 bid, 95 offered ,which represented spread tightening of about 16 points on the day and more than 30 bps on the week.

Zambia’s 8½% notes due 2024 were seen 105 bid, 106 offered, which was 28.5 bps tighter on the day.

Zambia’s 8.97% bonds due 2027 were at 107 bid, 108 offered, which was tighter by 15 bps, according to a London-based trader.

With reason charges against jailed opposition leader Hakainde Hichilema likely to be dropped, the mediation process may lead to the creation of a roadmap to reforms ahead of the 2021 elections. Zambia bonds have opened 20 to 30 bps tighter on Monday.

The United Party for National Development leader Hichilema and five others were arrested in April and charged with treason after Hichilema’s convoy failed to make way for President Edgar Lungu’s motorcade.

Hichilema’s trial had been due to begin on Monday, but two sources said the prosecution would apply to the court to discontinue the case.

Namibia credit wider

Namibia’s 5½% notes due 2021 were seen 108 bid, 109 offered with a spread wider by 11 bps.

Namibia’s 5¼% notes due 2025 were 101.52 bid, 102.37 offered and a 12-bp-wider spread.

But Namibia’s 9.2% notes due 2025 were seen 116.37 bid, 117.62 offered, with a spread better by 6 bps.

Namibia’s ratings downgrade by Moody’s was influenced by a rise in the country’s public debt to 42% of GDP from 26% in 2011. In addition to eroded fiscal strength, Moody’s noted that its institutional capacity to respond to shocks is limited and there is a renewed risk of government liquidity issues.

Namibia was a big underperformer on the African continent, which saw most sovereign credits improve on the day. Angola, Gabon, Ghana and Nigeria were all tighter after widening by 20 to 30 bps last week.

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