25 Feb 2020 CEEMEA Biannual Magazine ‘Forum Shopping’ & CEEMEA corporates OP-ED: Lebanon’s future TULLOW facing a disappointing OIL year 2 Contents Primary A green path to good governance in emerging markets? 04 Secondary Africa bull run to continue into 2020 05 Tullow Oil: A disappointing year 07 Restructuring Nostrum faces down turbulent 2019 10 Republic of Congo: Glencore and Trafigura seek financial advisors for debt negotiations 12 Features African sovereigns boost borrowing with innovative credit enhancement measures 14 Uzbekistan begins a long journey of reform 16 Scoop Radar A selection of stories broken by Debtwire’s CEEMEA team ahead of any other news publication 18 Legal New DIFC insolvency law at cutting edge of global legal practice 22 Legal Case Profile: Ukraine 24 Restructuring Database ‘Forum Shopping’ and its appeal to CEEMEA corporates 26 Shareholder Profile Shareholder Profile: Ihor Kolomoisky 28 Op-Ed Lebanon hangs by a thread 31 CEEMEA Credit Research Cell C’s recapitalisation efforts ongoing 33 NMC Healthcare: Muddy Waters Report clouds positive 1H19 results 37 3 Elias Lambrianos Managing Editor [email protected] Welcome The assassination of a prominent Iranian general; a far- Meanwhile, the hangover from Turkey’s currency crisis fetched peace plan for Jerusalem; a mounting financial is far from over. Large-sized debt reorganisations are crisis in Beirut; confirmation of Brexit blowing a hole in set to remain on the cards in 2020, although whether the EU project. The year could have had a better start. secondary market trades at a discount become a feature of the market remains to be seen. But the outbreak of a virus in Hubei quickly overshadowed other global events. Fear the novel Primary issuance continued apace in 2019. The coronavirus could reach pandemic levels prompted MENAT region topped issuance of bonds and loans, a flight for safety in the credit markets, with sellers accounting for 55% and 59% of total CEEMEA volumes of Russian and Middle Eastern credit, as charted in respectively, according to Debtwire Par. Debtwire CEEMEA’s weekly market comments. With low or negative yields in the US and Europe With so much happening, it’s been a challenge to find tightening credit spreads in emerging markets, Gulf time to contemplate the past year. issuers were in a prime position to tap the bond market – despite omnipresent geopolitical risk. It was full steam ahead for Debtwire CEEMEA’s sovereign coverage in 2019, with Lebanon’s economic But there are two sides to every trade. Last year’s crisis thrusting the nation into the limelight. The victim was the syndicated loan banker, with MENAT loan Mediterranean country was far from the only actor on volumes down some 27% year-on-year in 2019. the distressed sovereign stage – with Mozambique, Zambia and the Democratic Republic of Congo all Elsewhere in CEEMEA, despite ongoing Russia providing ample copy for headline writers. sanctions continuing to hamper debt-raising efforts in the country, a spate of bond placements from debut At the other end of the spectrum, Ukraine, just four and rare issuers from the CIS region offered plenty of years after a painful debt reorganisation, enjoyed a alternative destinations for investors to put their money remarkable rally. Its GDP-linked warrants soaring to to work. par and beyond from around the 30c mark post- restructuring. Sub-Saharan African markets remain dominated by increasingly sophisticated sovereign issuers, that – Our wider restructuring team was equally busy last year, having already stepped into the international issuance unravelling corporate failures and reporting on the market – are now seeking to diversify their funding latest negotiations between creditor and company. bases with syndicated loans, new currencies, and utilising novel credit wraps form the World Bank and A slowdown in construction and real estate in the trade insurance agencies. UAE ensured a steady stream of newly distressed candidates from the region, while the arrival of new The inaugural issue of the DEBTWIRE CEEMEA bankruptcy regimes in the UAE, Bahrain and Saudi MAGAZINE provides but a glimpse into the array of Arabia kindled optimism that several long-in-the-works scoops generated and situations covered by our restructuring deals may finally reach fruition in the Gulf. editorial and analytics team. 4 A green path to good governance in emerging markets? PRIMARY David Graves – Deputy Editor It is a widely accepted truism that corporate governance Issuers of green bonds are more frequently seeking standards in developing markets lag behind those in both this ‘second party opinion’ and an ESG the U.S. and Western Europe. Think back over the major rating, according to a spokesperson for research emerging market corporate restructurings of recent firm Sustainalytics, which provided both for DTEK years; in nearly every case, a serious governance failure Renewables. While investors with a specific ESG either caused or contributed to the crisis. mandate require the sort of reassurance a rating provides, conventional emerging market investors are An accounting scandal brought supermarket chain gradually coming to appreciate the benefits too. Agrokor, Croatia’s largest employer, to its knees. Endemic graft laid Brazilian construction behemoth Odebrecht An ESG rating offers hard evidence of whether a low. In South Africa, a black hole in the balance sheet company’s management is thinking for the long-term or rendered retail giant Steinhoff’s equity virtually worthless. just ahead to the next quarter. As the ESG movement These sins are not unique to the emerging markets. gains traction, investors will reward those that actively demonstrate their sustainability and governance However, the risk of a serious lapse in governance is, to credentials with lower interest rates and higher a far greater degree than in developed markets, simply valuations. accepted as part of the ordinary course of business As an oligarch-owned corporate based in Ukraine, Ukraine’s first issuance of a green bond came earlier currently ranked 120 out of 180 countries on the in November, as solar and wind farm operator DTEK Corruption Perception Index, DTEK Renewables may Renewables tapped the market for a five-year €325m seem an unlikely candidate to pioneer such governance note. practices. But it is exactly these types of businesses – based in high-risk jurisdictions or with controversial Green bonds work just like any other bond, except shareholders – that stand to gain most by embracing proceeds are allotted to environmentally sustainable these principles. projects. Quite aside from the environmental gains, the role sustainable finance plays in strengthening Of course, the green finance route is not for everyone. corporate governance is becoming increasingly For one thing, not all companies have eligible green apparent. projects to finance. There is nothing, however, preventing emerging market issuers from adopting the Investors can take comfort in the fact that funds are good governance practices that accompany it. earmarked for specific, pre-approved, projects – monitored over the life of the debt – rather than simply But state electricity company Eskom, drowning under disappearing into the company coffers under the guise $30bn of debt, desperately needs funds. Blighted by of “general corporate purposes”. years of corruption, it also desperately needs to regain investor trust. Incorporating sustainable finance into its More importantly, green bonds fit naturally into the funding mix, which would also necessitate making a firm broader Environmental, Social and Governance (ESG) commitment to high governance standards, could help agenda. Not only did DTEK Renewables commission to achieve both. a ‘second party opinion’ regarding the eligibility of its projects for green financing, it also licensed an Green finance is not a panacea and issuers of green overarching ESG rating – not dissimilar to a credit rating bonds are not immune from default. Two of most active for good corporate behaviour. developed market issuers – high-yield corporates 5 Abengoa and Senvion – ended up in insolvency While issuance of green bonds from emerging market proceedings. As always, credit analysts have their work corporates remains relatively scarce, volumes are cut out for them. expanding fast. According to the Climate Bonds Initiative, EM non-financial corporates raised $12.93bn But anything that encourages a closer alignment worth of green bonds in 9M19, up from $4.5bn in the between emerging market and developed market same period last year. Further growth in the industry is corporate governance standards is a step in the right to be warmly welcomed. direction. An ESG rating offers hard evidence of whether a company’s management is thinking for the long-term or just ahead to the next quarter. 6 Africa bull run to continue into 2020 SECONDARY Michael Ogunleye – Assistant Editor Africa’s unrelenting bull run has shown no signs of Fed tightening.” letting up and may still have legs going into 2020. Emerging Market (EM) bonds have rebounded strongly So what should the market expect as we approach the in 2019, with both hard currency and local indexes new year? More of the same, according to those polled. returning double digits last year. The Fed and ECB are not expected to raise interest rates next year, which should encourage further deal Favourable external factors contributed massively to flow. the EM rally, as central banks pursued a more dovish approach to interest rates. Several issuers rushed Even though recession fears have eased, the global to take advantage of these conditions, with the likes environment remains challenging. Low growth and of Ghana, Ivory Coast and Kenya among others falling industrial production should keep rates at record printing about USD 25bn worth of Eurobonds in 2019, low levels. according Ed Hoyle, vice president of Standard Bank’s DCM syndicate. “As Developed Market (DM) yields remain low, we’ll continue to see a trickle of DM investors into EM “This year’s African Eurobond volumes are in line with territory, which they never would have touched last year’s, showing they have stabilised after several otherwise,” said a London-based buysider.