For the first time since early 2015, German GDP growth turned negative at -0.2% quarter on quarter (q/q) in Q3. Te… https://t.co/Nk3s89mEOW
Capital Markets Weekly: Improving trend in Brazil with three diverse privatizations pending
The Brazilian election result was largely as expected by the markets. Brazil's EMBI+ index has tightened over 10% in spread terms during October while its 10-year domestic bond yield has fallen from over 12.5% in early September to 10.12% on 31 October.
There are also some positive MENA debt indicators. Qatar National Bank reportedly has started syndication on a EUR2.25 billion facility, its second major loan refinancing this year. The new deal is to refinance an outstanding three-year facility maturing in May 2019. In February, the bank replaced a prior maturing USD3 billion facility with a USD3.5 billion new syndication, upsized due to strong demand from 21 participating banks. Additionally, Bahrain's Oil and Gas Holding Company is meeting investors, reportedly ahead of a six and 10-year dollar deal. This would be the first Bahraini public issuance since its sovereign-level rescue.
The Republic of Seychelles has issued a debut "blue bond", a new ethical instrument. The issue, designed with World Bank involvement, raised USD15 million from three institutional investors to fund sustainable marine and fishing projects. The 10-year bond was priced at a 6.5% coupon. It is backed by a concessionary loan from the Global Environment Facility and a World Bank guarantee for USD5 million. Arunma Oteh, vice-president and treasurer of the World Bank, claimed the issue should "pave the way for others", drawing parallels with the wider Green Bond market.
Despite recent volatility and last week's US selloff over disappointment with forward earnings projections, three significant privatizations are being marketed this week. These represent an important test of market resilience, while having significant impacts for the vendor countries.
India is seeking up to INR149 billion (USD2 billion) from a privatization of up to 9% of Coal India. It started a two-day book-building on 31 October to place a minimum of 3% in the company, where the state owned 78.32%, at a price of INR266 per share, a 6% discount to the prior day's close. The government has the option to sell an additional 6% (or 372.4 million shares, versus the initial block of 186.2 million shares). The transaction reflects a government pledge to reduce its holding in Coal India to 25%, initially by August this year. This deadline has been extended by a further two years.
The Slovenian government has set pricing for the flotation of Nova Ljubljanska Bank (NLB), the country's largest bank, after favorable reported investor feedback. The shares are being listed in London and Ljubljanska at EUR51.5-66 each, valuing the bank at EUR1.03-1.32 billion. The offer period opened on 29 October and is expected to run until 8 November for institutional buyers, but is subject to adjustment. The vendor - the Slovenian state - will place at least 50% of the bank's capital with a further 25% due for disposal during 2019. NLB is the country's largest bank with a market share of 23.2% by assets, and was previously bailed out by the Slovenian authorities in 2013: its flotation is to comply with EU requirements.
According to the Financial Times on 31 October, Kazatomprom is targeting a share price of USD11.6-15.4 per share for 15% of the company, which would be valued at around USD3-4 billion. Prior reports had suggested that Kazakhstan's sovereign wealth fund Samruk-Kazyna might place 25% of the world's largest uranium producer in the offering during November. 20% of the offering will be made available to domestic investors through the Astana Stock Exchange. Also in Kazakhstan, but at a far earlier stage, is the potential flotation of KazMunayGas (KMG), the country's state-owned oil and gas company. Media reports suggest that KMG is in the process of appointing banks for a potential share sale, but that this would be unlikely until late 2019.
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