Debut bond issuers sign of maturing CEEMEA

Thu Apr 4, 2013 11:41am EDT

LONDON, April 4 (IFR) - Debutante and infrequent borrowers dominate the bulging CEEMEA bond pipeline as new names seek to take advantage of propitious issuance conditions.

This week, AKLease, Exillon Energy, Eurasia Drilling and Sekerbank have all announced their intention for debut issues (Sekerbank has printed a covered bond before but never a senior unsecured transaction). They join Kazakh railroad operator Eastcomtrans, which is also poised to make its first foray into the international bond markets.

The rumour mill, too, is filled with potential first-time borrowers, including Polyus Gold, Nordgold and Koc Holding.

"It's a simple case of price compression and risk appetite. The needle has moved to a point where investors are crying out for something different," said Nick Darrant, head of CEEMEA debt syndicate at BNP Paribas.

That these potential issuers, many of which are lowly rated, feel able to tap fixed income investors is a sign of how quickly the market is changing. The region is developing in the same way that Asia and Latin America have already done so, as private sector corporates become a growing and profitable chunk of the issuance pie.

"It's the next phase in the evolution of our market," said William Weaver, head of CEEMEA debt origination at Citigroup. "We are gradually seeing a market where we are getting true high-yield names and therefore the double whammy of emerging markets and high-yield risk in the same transaction."

As well as attractive pricing, bankers say the tail-off in lending is another reason why corporates are increasingly turning to the bond market.

"It's the continuing rebalancing from the bank market to debt capital markets. Corporates are not necessarily taking on new debt. But treasurers who didn't look at this space are now clearly considering this funding option," said one origination official at a European bank.

While first-quarter loan volumes in the CEEMEA region, at US$29.5bn, were up 19% year-on-year, they were still significantly less than the US$55bn raised in the region's bond market over the same period.

Whether all these new names print successful transactions remains to be seen, however. Earlier this year, one potential debutante, RusPetro, postponed its proposed offering after announcing initial price thoughts as investors became unnerved by some poor financial results.

But in an environment where rates remain at historical lows, and the search for returns is intensifying, issuers that offer investors the chance to pick up yield and gain from possible spread compression should be attractive.

The flurry of debut issuance is just one strand of what is expected to be one of the busiest ever months in CEEMEA, with a wide variety of borrowers likely to be in the market from sovereigns to banks to corporates, rated from Double A to Single B.

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