Kuwait’s Equate prints notes; EM tone still solid, even amid confusion; Agrokor bonds drop

By Christine Van Dusen

Atlanta, Feb. 13 – Kuwait’s Equate Petrochemical Co. KSCC on Monday priced new notes during another solid session for emerging markets assets as investors awaited Federal Reserve Chair Janet Yellen’s testimony later this week.

“EM continues to thrive on the solid backdrop, notably ongoing uncertainty about the U.S. fiscal policy and still fairly limited supply, and despite ongoing rates volatility,” a London-based analyst said. “Things are getting a bit more complex, however, with global political uncertainty becoming a main determinant and mainly driven by concerns on European elections. This is also reflected by the increasing spreads between Bunds and several other European government bonds.”

As far as Yellen’s testimony goes, investors are looking for signs that a rate hike will come in March, according to a report from Schildershoven Finance BV.

“Any growth in hike expectations will become a trigger for market correction,” the report said. “Additionally, market is waiting for a tax program announcement by [President Donald Trump].”

The hope is that this announcement will clear up confusion.

“Understanding the implications of Trump’s policies on markets – and EM credit specifically – hasn’t gotten easier,” the analyst said. “So far, not much has been said on fiscal stimulus and tax cuts, with Trump’s announcement of a ‘phenomenal’ corporate tax reform within the next three weeks being not more than an appetizer.”

There’s also some uncertainty related to foreign trade policy, he said.

“While Trump has previously [accused] China and Japan of deliberately devaluing their currencies, he chose a softer stance in a phone call with China’s President Jinping and his meeting with Japan’s Prime Minister,” he said. “While this already served to calm down political hawks in Asia, we are now looking to Wednesday, when the Trump-Netanyahu meeting might reveal more about the U.S. administration’s Mideast policy, which could include Israel’s settlement program, but also some words on Iran.”

Agrokor plummets

In trading, bonds from the Agrokor Group plummeted to a record low after a Russian official said the nation might not help the Croatian company refinance its loans, Schildershoven said in a report.

The official said that if Agrokor sought help from the Russian government, the government would consider it while taking into account the company’s “complicated situation.”

Agrokor says it has not asked to borrow more from Russian banks.

“Of course, comments from the Russian ambassador on possible loans to Agrokor sound quite negative,” the report said. “However, we focus now on the company’s possible IPO or assets sale, which should partly resolve the debt problem.”

Equate sells bonds

In its new deal, Kuwait’s Equate priced $500 million 3.944% Islamic bonds due Feb. 21, 2024 at par to yield 3.944%, or mid-swaps plus 175 basis points, a market source said.

The notes were talked at a spread in the mid-swaps plus 210 bps area.

Citigroup, HSBC, JPMorgan, KFH Capital and NBK were the global coordinators and – with Mizuho, MUFG, National Bank of Abu Dhabi and SMBC Nikko – joint bookrunners for the deal.

In October the issuer priced $2.25 billion of senior notes in two tranches, with $1 billion 3% notes due 2022 pricing at a 195 bps over mid-swaps. A $1.25 billion tranche of 4¼% notes due 2026 priced at mid-swaps plus 270 bps.

Equate is 85% owned by Petrochemical Industries Co. and Dow Chemical and produces essential chemical compounds as the largest petrochemical complex in Kuwait.

© 2015 Prospect News.
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