Africa

Banks providing reserve-based lending facilities to oil exploration companies are looking to sell these loans, usually held and refinanced as ultra-secure relationship products, at bargain basement prices.

South African bank Investec has chosen to extend the tenor of an existing loan instead of refinancing it, in an attempt to avoid paying the wider margins lenders are demanding as a result of the coronavirus pandemic.

With emerging markets across the globe facing an overwhelming liquidity squeeze, the IMF said on Thursday that it would “look for solutions that can unlock critical financing” in countries where the unsustainability of debt prevented the fund from lending, potentially increasing funding options for the most stressed of countries.

Nigeria, Africa's largest economy, is the latest emerging market to approach international financing institutions for help to deal with Covid-19.

More than 100 charities and other organisations are urging that developing countries' debt payments be cancelled this year. They have called for interest and principal payments to be withheld from public and private sector lenders.

The number of year-to-date loans signed across CEEMEA more than halved compared to last year, which bankers said is a direct result of the coronavirus crisis that has engulfed countries and markets worldwide. The outlook for issuance is bleak, to the dismay of many lenders.

Turkey has joined the list of emerging market countries experimenting with quantitative easing programmes in the wake of the Covid-19 crisis engulfing conventional funding markets.

Moody’s downgraded South Africa on Friday, removing the battered sovereign’s final investment grade rating. Sentiment among investors and bankers was split, with some confident that borrowers will be able to lean on their relationship lenders if needed, and others worried about the economic hit which is heading the country’s way.

The pace of emerging markets borrowers’ requests for official institution funding, amid the shocking deterioration of their bond markets, is picking up pace. On Sunday, Ukraine's president Volodymyr Zelensky said that he had discussed using International Monetary Fund resources to fight the economic impact of Covid-19.

A strengthening dollar and continued volatility in the oil price on Thursday gave a further battering to emerging markets, increasing borrowers' vulnerability.

Sasol, the South African chemicals company, has unveiled a $6bn package of measures designed to shore up its business, which has been damaged by the spread of the Covid-19 virus and the collapse in oil prices.

As the deadly Covid-19 virus continues to wreak havoc on global markets and supply chains, emerging market lenders are proceeding to discuss financing options with clients, but are only comfortable funding those of the highest quality, according to bankers. Origination processes are becoming more stringent than ever, with some lenders requesting to see borrowers detailed contingency plans.