Monday 12 October 2020

The Covid-19 hiatus didn't stop CEEMEA from recording record levels of issuance in H1, underlining its resilience. What explains the region's success?


With the markets in a tailspin in early March because of Covid-19, one notable debt segment that saw a rapid recovery was the CEEMEA (Central and Eastern Europe, Middle East and Africa) capital markets. With central banks stepping in to provide liquidity and macroeconomic stability, issuers in the region – especially sovereigns, which are seeking to plug a gaping fiscal gap – have seen significant investor inflows in search of higher yielding assets.

The result? A record YTD for debt capital markets volumes in CEEMEA. Central and Eastern European issuance alone has already surpassed the supply for each of last five years.

The region's success further underscores the major role leading banks play in facilitating liquidity in the markets during periods of market distress. They provide critical market advisory to issuers to tap pockets of liquidity across the yield curve – and ultimately give investors and issuers alike the confidence to buy and sell new issues.

Spotlight on BNP Paribas in CEEMEA

BNP Paribas' CEEMEA debt capital markets (DCM) team played a vital role in driving forward the region's recovery from Covid-19 impact in 2020: the bank has advised and helped issuers place more than $37 billion of sovereign debt in the region. It was active on one-third of all sovereign debt raised in the first half of 2020.

Overall, the bank has lead-managed a total of 22 transactions in the region between January and June, amounting to $42.6 billion in bond issuance and representing c.30% of the entirety of CEEMEA supply [1]


Busiest ever half-year period for CEEMEA region
Source: Dealogic


CEEMEA 2020YTD issuances tangibly surpass respective values of previous years
Source: Bond Radar


CEE issuance volume already surpassed annual supply of each of last five years
Source: Bond Radar


Spotlight on the market: highlights from H1 2020

The Republic of Slovenia reopened the CEEMEA debt market for sovereigns following the outbreak of the pandemic with a €1.1 billion dual-tranche deal on 24 March, the first from the region in over a month. In the Middle East and Northern Africa (MENA), meanwhile, Mamoura reopened the market with a $4 billion deal, which became the first corporate issuance from the region since the outbreak, with the largest order book ever for a Reg S-only transaction from the emerging markets. It was also the largest USD-denominated Reg S-only corporate issuance from throughout the emerging markets. (BNP Paribas was lead manager.)

The market for Middle Eastern and Central Eastern Europe government debt in particular gathered momentum, given the greater investor appetite for higher-grade issuers. In giving the wider CEEMEA market the jolt it needed, lower grade issuers were then able to take advantage.

Notable sovereigns that entered the fray included Serbia's €2 billion 7-year bond in May, marking the largest ever single-tranche EUR issuance by a sub-investment grade (sub-IG) sovereign from the CEEMEA region, and the second largest in the emerging markets overall. It was also the first sub-investment grade emerging markets EUR sovereign following the Covid-19 outbreak.

Romania followed up with a €3.3 billion dual-tranche bond that gathered investor interest topping €12.4 billion – a record for Romania – in May against a background of persistently volatile markets. Meanwhile, Abu Dhabi's €3 billion triple-tranche transaction was the first in emerging markets sovereign space in the last five years to price a benchmark tap with a negative new issue premium, meaning it was priced more favourably than the country's outstanding debt. At a staggering $20 billion+, it was the largest order book seen for a tap deal in this segment in the last five years.




Spotlight on BNP Paribas CEEMEA DCM: the team

BNP Paribas' CEEMEA DCM and Syndicate team has played a pivotal role in the region's capital markets recovery after the Covid-19 – providing critical advisory, finding pockets of liquidity – above all, embedding trust among issuers and investors alike. This follows its doubling of market share in 2019, its eight-strong team ranking fourth for bond issue volume, according to Dealogic.

The team, headed by Alexis Taffin de Tilques, comprises professionals from Cyprus, France, Pakistan, Russia, the UK and Ukraine, which Alexis believes positions it well to serve the diverse cultures, regions and nationalities of the issuers it covers.

Picture taken in 2019

[1] Summary of key CEEMEA transactions 2020 for more details.



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