All material subject to strictly enforced copyright laws. © 2022 Euromoney Institutional Investor PLC group
CommentGC View

Plenty of pulled deals but the CEEMEA market is working fine

On the surface, the last few weeks has been a torrid one in the CEEMEA primary markets. A string of names postponed bonds, and one printed at a yield a whopping 150bp wide of initial price thoughts. But these events are not indicative of a foundering market — they are the result of investors taking realistic decisions about where they want to invest and at what price.

The list of postponed deals includes Tiger Resources, KazStroyService, New Europe Property Investments and Polish coal companies JSW and KWSA. South African FirstRand Bank finished its roadshow at the end of last month and is yet to print its bond, but has not made an official postponement announcement. Euroget, a structured Ghanaian deal, did get its bond over the line last week, but it was priced at a yield of 12.5%, 150bp wide of initial price guidance.  

But though it would understandable to see this list and assume that the market for emerging market high yielding names is a bad one, that assumption is wrong. 

The names that are struggling are those where investors are railing against individual stories, not the high yield market in general. Polish coal for example, is a tough sell because of the sinking price of that commodity — many investors made a binary decision over whether to get involved. FirstRand could likely have printed by now, but its reluctance is undoubtedly around finding the right price, which in light of the recent Moody's downgrade of South Africa has become more difficult. 

Getting Euroget done evidently was a matter of price, though a price 150bp wide of guidance, but some price discovery was justified for a structured deal with no evident comparables. The market had to debate what premium over Ghana sovereign risk for the structure, but even if the leads did not start in the right place, they got there in the end.

Other bonds that fall into a similar high yield bracket have been printed — Yasar Holdings for example, or Global Ports. The market is not shut for EM high yield bonds, say bankers. And higher rated names such as Mumtalakat and Emirates National Bank of Dubai seem to be flying off the shelves.

With such an array of names offered on a platter before them, investors are being selective. They are not buying every bond simply because they need to take risk somewhere and they are hungry for yield.  Instead they are looking carefully at each credit before deciding on a suitable price or whether they want to be involved at all, and they are sticking to that. Gone are the days when investors buy having not bothered to read the prospectuses — they will at least skim them now.  

Giving investors enough supply to allow them to choose is a good thing and makes the market healthier as a whole. We are not in a raging bull market, but that doesn’t mean we are in a bad one.

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree