Emerging EMEA Bond House: JP Morgan
It was the year of the re-emergence of Russian issuance, the Middle East sovereign jumbo and liability management. No bank did more to lead those themes than JP Morgan, which wins IFR’s Emerging EMEA Bond House of the Year.
On November 10, a little more than 24 hours after Donald Trump had been confirmed as the next US president, and as rates markets were convulsing, Gazprom completed a €1bn, seven-year trade.
For JP Morgan, one of the leads on the deal, along with Bank of China, Gazprombank and UniCredit, it was business as usual, despite the big sell-off in Bunds and Treasuries.
It was also confirmation of a dominant display by the US bank in one of the big stories in the CEEMEA region over the past year: the pick-up in Russian supply.
Many state-owned entities are still barred from issuing because of sanctions. But of the 21 issuers from the country that did access the markets, JP Morgan acted as a lead manager for 11 of them (in 13 separate transactions), more than any other bank.
This included debut names such as Global Ports Investments, State Transport Leasing Corporation and O1 Properties, and blue-chip borrowers such as Evraz, Russian Railways, Lukoil and Gazprom.
While other banks have reined in their Russian coverage, JP Morgan has remained steadfast in its commitment to the country.
A big reason behind the bank’s success in Russia is its ratings advisory business. “In Russia, for many of the deals we’ve been the ratings adviser,” said Stefan Weiler, head of CEEMEA debt capital markets.
The ratings advisory business gives JP Morgan a good tie-in with Russian clients, but it wouldn’t continually win business unless it executed the deals well.
Conventional wisdom is that Russian transactions need the support of the local investor base and little more, but it’s more nuanced than that.
“International placements are critical otherwise you won’t get big enough order books to tighten pricing,” said Nick Darrant, executive director at the firm.
Finding the balance between local anchors and more-price sensitive international accounts is key, especially as some of these credits are not straightforward.
While Russia is the standout area of its CIS business, JP Morgan has also had successes in Georgia, Azerbaijan and Kazakhstan, and led Ukraine’s US AID deal in September too. Indeed, it acted as a lead in all the CIS ex-Russia deals in 2016.
But JP Morgan is much more than a CIS house. Take its achievements in the Middle East, where sovereign issuance volumes doubled this year from last.
JP Morgan was on all the sovereign trades from the region bar Lebanon, from Saudi Arabia’s record-breaking US$17.5bn transaction to deals for Qatar, Bahrain (twice), Jordan, Oman and Abu Dhabi.
Undoubtedly, lending relationships with many of these sovereigns helped. But that alone doesn’t explain JP Morgan’s presence on these deals, especially as it was on the top line of every bond mandate it won.
Acting as a ratings adviser for Saudi Arabia, for example, was also a factor on that deal. But more broadly, the one standout feature is that it was the documentation bank for each of these sovereigns.
It might not be the most glamorous aspect of a transaction but ensuring disclosure sections of prospectuses are up to the standards of investor requirements is one of the important nuts and bolts.
“It’s the role where the issuer looks for the most guidance,” said Weiler. “It illustrates our strong reputation as a good adviser and safe pair of hands. We get a lot of repeat business because the process is managed very efficiently.”
Liability management has been another important market theme where JP Morgan has excelled. In the sovereign world, it helped Latvia and Slovenia reprofile their debt through a combination of a new euro issue with a buyback of their US dollar bonds.
In the corporate sector, it was involved in deals for more beleaguered credits, including an exchange offer for Nigeria’s Access Bank and a consent offer for Ukrainian corporate MHP.
While these have been the big themes of 2016, just as illustrative of JP Morgan’s excellence has been the niche trades: the first covered bond from Poland for PKO Bank Hipoteczny; and the only local currency Eurobond deals of the year, in roubles for Russian Railways and Turkish lira for Garanti Bank.