Russia stutters on sanctions blow, but rest of the market carries on regardless
Bankers focused on Russia and the former CIS have eyes firmly fixed on the harsher EU and US sanctions slapped on Russia, which are set to shut down bond market access for some of the biggest Russian issuers such as state owned VTB. The updated sanctions follow a week in which Japan has indicated its intentions to enforce sanctions on the country, a $50bn fine was awarded in favour of Yukos’s former owners, and accusations of war crimes.
But the isolation of that situation from the rest of the emerging markets is being shown as bond bankers in other parts of CEEMEA continue to churn out deals, keeping the market active going into the summer.
Seven Energy has released price guidance for its seven year non-call three bond at mid-9% area. The deal is expected to have a size of $500m and will be this week’s business. Though the market is slowing, more deals are being queued for next week — Latvian consumer lender 4Finance announced a roadshow this week via Credit Suisse while Polish retailer EMF Group is planning a new bond.
The same attitude appears to have prevailed in the syndicated loans market, with two emerging market bankers saying that a shut down of Russian loans will only make them more determined to go after business elsewhere. But in practice the market has hit a lull this week with bankers taking stockof the extent of the EU Russia sanctions.
In particular, VTB’s $1.5bn loan hangs in the balance now that it has been brought into the list of sanctioned entities. Earlier this month VTB had gathered together a club of 10 banks for the deal, including Bank of America Merrill Lynch, Citi and JP Morgan, with Barclays co-ordinating.
In Latin America, there are signs that Argentina is trying to pull off a last minute miracle to avoid a default, just as the market seemed to be accepting that the sovereign would not back down in its determination not to pay holdout creditors. Economy minister Axel Kicillof arrived in New York on Tuesday afternoon for face-to-face talks with the holdouts, pushing Argentina's exchange bond prices up three points. It was the first time the sovereign and the funds that are suing it have met face to face, and Kicillof's presence at the talks represents a sudden volte-face in attitudes, as the minister had previously said he would not attend talks.
In addition, Argentine private bank association ADEBA is understood to be preparing a bid to help the sovereign avoid default by paying holdouts itself. This would free Argentina of the RUFO clause that gives exchange bondholders the right to the same offers made to holdout creditors. The government recently says the RUFO clause is what stops it being able to make full payments to holdouts.
Away from Argentina, LatAm traders reported low volumes as August nears, though Paraguay and Colombian infrastructure lender Findeter are looking to provide more new issue supply next week once they wrap up respective roadshows. An Argentine default would be unlikely to affect the rest of LatAm debt markets, say bankers, given the sovereign does not have market access in any case.
Francesca Young +44207 779 7313
Dan Alderson +44207 779 8297
Steve Gilmore +44207 779 7298
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