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Plenty of pulled deals but the CEEMEA market is working fine

On the surface, it's been a torrid past few weeks 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 don't indicate a foundering market — rather they are a sign of investors taking realistic decisions about what they want to invest in 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 it has not announced a postponement. 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 although it would be understandable to assume that the market for emerging high yield names was poor on the basis of this list, that assumption would be wrong.

Investors are reacting to particular circumstances, not the high yield market in general. Polish coal, for example, is a tough sell because the price of that commodity is sinking— many investors made a binary decision over whether to get involved. FirstRand could likely have printed by now but its reluctance is undoubtedly about 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 also a matter of price, although some price discovery was justified for a structured deal with no evident comparables. The market had to debate the premium over Ghana sovereign risk for the structure, but even if the leads started in the wrong place they got there in the end.

Other bonds that fall into a similar high yield bracket have been printed — Yasar Holding, for example, and Global Ports. The market remains open 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 being offered on a platter, investors are being selective. They are not buying every bond simply because they need to take risk somewhere and 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. Gone are the days when investors bought, 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.

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